This paper characterizes optimal labor-income taxes that depend on age, household assets, and filing status (one or two earners) within a life-cycle model with heterogeneous, two-member households and endogenous human capital. The key innovation is a labor supply elasticity that varies...

Validation has been an important issue in using the ABM approach. It has been pointed out that deriving the necessary conditions for reproducing specific macro behavior is difficult due to the functional complexity of the models. However, based on the authors' experience in ABM, we believe it is...

Given that young children are under the control of their parents, if the government has an interest in either the welfare or the productivity of the former, it has no option but to act through the latter. Parents are, in the ordinary sense of the word, the government’s agents. They are agents...

Given that a child's birth and lifetime earning capacity are the result of actions undertaken by the child's own parents, if the government has an interest in the welfare or tax-paying capacity of its future citizens, it has no option but to condition the decisions of its present citizens....

The paper presents a new method to solve DSGE models with a great number of heterogeneous agents. Using tools from systems and control theory, it is shown how to reduce the dimension of the state and the policy vector so that the reduced model approximates the original model with high precision....