The welfare-maximizing income tax structure, rate of money creation, and amounts of intergenerational transfers are jointly determined for given rates of government consumption. When government consumption is zero, it is found for the parameter values examined that the income tax structure is...

1993 Annual Report essay

Minneapolis Fed Vice President Preston Miller suggests that long-term federal budget problems, exacerbated by the needs of an aging population, might be alleviated by a new approach to funding benefits received by that same aging population.

We incorporate nominal wage contracts and government into a quantitative general equilibrium framework. Thus, our model includes three types of shocks: a fiscal shock, a monetary shock, and a technology shock. We show that it is possible in this type of environment to generate a low correlation...

This paper investigates the impact of aggregate variables of changes in government consumption in the context of a stochastic, neoclassical growth model. We show, theoretically, that the impact on output and employment of a persistent change in government consumption exceeds that of a temporary...

This paper describes a dynamic model in which the provision mechanism for a public project is itself the object of locational choice of individuals. Individuals in an ongoing society must choose between a Majority Rule mechanism and a Voluntary Contribution mechanism. Each mechanism determines a...

In this paper we present a formal model of vote trading within a legislature. The model captures the conventional wisdom that if projects with concentrated benefits are financed by universal taxation, then majority rule leads to excessive spending. This occurs because the proponent of a...

This paper presents a simple general equilibrium model of optimal taxation in which both private agents and the government can default on their debt. As a benchmark we consider Ramsey equilibria in which the government can precommit to its policies at the beginning of time, but in which private...