In this paper, we perform computational counterfactual experiments to examine the quantitative impact of marginal tax rates on the distribution of income. Our methodology builds on previous simulation models developed by Auerbach and Kotlikoff and Fullerton and Rogers, and uses an algorithm that...

Using the well-known dynamic fiscal policy framework pioneered by Auerbach and Kotlikoff, we examine the efficiency and welfare implications of shifting from a linear marginal tax rate structure to a discrete rate structure characterized by two regions of flat tax rates of 15 and 28 percent. For...

An argument that curtailing deductions for personal interest expense would be a more effective strategy for increasing national saving.

Macroeconomic and microeconomic data paint conflicting pictures of price behavior. Macroeconomic data suggest that inflation is inertial. Microeconomic data indicate that firms change prices frequently. We formulate and estimate a model which resolves this apparent micro - macro conflict. Our...

A perspective on the Federal Reserve's policy moves in 1994 to maintain the desired rate of monetary growth in the face of other rising market interest rates and a suggestion that the Fed adopt formal multiyear commitments to specific inflation objectives to enhance its credibility and allow it...

The authors analyze an overlapping-generations framework that accommodates two observations: (1) the interest rate on consumption loans exceeds the rate of return to savings and (2) private intergenerational transfers primarily occur early in the life cycle. Assuming altruistically motivated...

This paper uses a new, large-scale, dynamic life-cycle simulation model to compare the welfare and macroeconomic effects of transitions to five fundamental alternatives to the U.S. federal income tax, including a proportional consumption tax and a flat tax. The model incorporates...

We develop the implications of borrowing constraints and two-sided altruism in an overlapping generations framework with agents who live three periods. Our analysis identifies six equilibrium patterns of intertemporal and intergenerational linkages in the no-loan economy, one of which...

This paper uses a new large-scale dynamic simulation model to compare the equity, efficiency, and macroeconomic effects of five alternative to the current U.S. federal income tax. These reforms are a proportional income tax, a proportional consumption tax, a flat tax, a flat tax with transition...