This paper proposes a simple OLG model which is consistent with the essential facts about consumer behavior, capital accumulation and wealth distribution, and yields some new and surprising conclusions about fiscal policy. By considering a society in which individuals are distinguished according...

We consider a two-period model. In the first period, individuals consume two goods: one is sinful and the other is not. The sin good brings pleasure but has a detrimental effect on second period health and individuals tend to underestimate this effect. In the second period, individuals can...