We propose behavioral learning equilibria as a plausible explanation of coordination of individual expectations and aggregate phenomena such as excess volatility in stock prices and high persistence in inflation. Boundedly rational agents use a simple univariate linear forecasting rule and...

This essay links some of my own work on expectations, learning and bounded rationality to the inspiring ideas of Jean-Michel Grandmont. In particular, my work on consistent expectations and behavioral learning equilibria may be seen as formalizations of JMG's ideas of self-fulfilling mistakes....

This paper contains nine different essays on Social Security reform and multi-pillar pension plans. The nine topics are: 1. Transition costs2. Progressive indexation3. Government guarantees on private accounts4. Life cycle investing5. Impact of add-on accounts on Social Security solvency6....

We study the aggregate effects of a social security reform in a large overlapping generations model where markets are incomplete and households face uninsurable idiosyncratic income shocks. We depart from the previous literature by assuming that, because of lack of commitment in the credit...

Increasing longevity causes an upward trend in the dependency ratio in many countries. This raises concerns about the financial sustainability of social security schemes, and reform initiatives and proposals abound. It is shown that a fundamental policy choice inevitably arises since a given...

In earlier literature, the suggested Pareto improvements in pay-as-you-go (PAYG) systems have relied on the presence of externalities or the possibility of intragenerational redistribution. We show that neither assumption is necessary in an economy with intergenerational trade in a fixed factor...

This paper studies the long-run aggregate and welfare effects of eliminating Social Security in a quantitative dynamic general equilibrium life-cycle model where parents and their children are linked by voluntary and accidental bequests. Social security in this model with impure altruism has a...

Is an assumption of bounded rationality needed to explain Social Security and other mandatory pension plans? In this contribution we argue that when rational agents hold inconsistent expectations such programs may be justified. Two of the features that distinguish Social Security and many other...

We show that in the formalization of representativeness (Kahneman and Tversky (1972)) developed by Gennaioli and Shleifer (2010), overreaction and confidence are affected by uncertainty, as a news effect interacts with an uncertainty effect. In the time series domain, this interaction emerges in...