A simple model is used to illustrate the effects of a reduction in (marginal) abatement cost in a two country setting. It can be shown that a the country experiencing a cost reduction can actually be worse off. This holds true for a variety of quantity and price based emission policies. The most...

This paper considers the macroeconomic implications of a set of empirical studies finding a high degree of dispersion in preference heterogeneity. It develops a model with both uninsurable idiosyncratic income risk and risk aversion heterogeneity to quantify their effects on wealth inequality....

The theoretical literature presumes generational risk is large enough to merit study and that such risk can be meaningfully shared via appropriate government policy. This paper questions these propositions. It develops an 80-period OLG model to directly measure generational risk and the extent...

The theoretical literature presumes generational risk is large enough to merit study and that such risk can be meaningfully shared via appropriate government policies. This paper assesses these propositions. It develops a computational technique to overcome the curse of dimensionality and...

When the challenges of population aging are being debated, the uncertain future of pension systems is a topic of high priority and large controversy. The aim of this chapter is not to provide a “consensus view” on social security and public insurance in aging populations but to put structure...

The goal of this paper is to show that household-level financial distress (FD) varies greatly, meaning there is unequal exposure to macroeconomic risk, and that FD can increase macroeconomic vulnerability. To do this, we first establish three facts: (i) regions in the U.S. vary significantly in...

Occupational specificity of human capital motivates an important role of occupational reallocation for the economy's response to shocks and for the dynamics of inequality. We introduce occupational mobility, through a random choice model with dynamic value function optimization, into a...