This paper provides a study of bond yield differentials among EU government bonds issued between 1993 and 2005 on the basis of a unique dataset of issue spreads in the US and DM (Euro) bond market. Interest differentials between bonds issued by EU countries and Germany or the USA contain risk...

This paper analyzes the dynamic politico-economic equilibrium of a model where repeated voting on social security and the evolution of household characteristics in general equilibrium are mutually affected over time. In particular, we incorporate within-cohort heterogeneity in a two-period...

This paper provides new evidence on the response of business investment to tax incentives. I use the variation provided by recent reforms to the Mexican corporate tax system, including the elimination and reintroduction of accelerated depreciation allowances applicable to investment undertaken...

This paper investigates how public policy responds to persistent ideological shifts in dynamic politico-economic equilibria. To this end, we develop a tractable model to analyze the dynamic interactions among public policy, individuals' intertemporal choice and the evolution of political...

In this paper we examine the welfare effects of government's preferences over consumption and investment spending under different methods of financing in a two-period OLG model. The government has a utility function defined over the decomposition of her spending over two periods and raises funds...

We investigate the welfare implications of changing the mix between capital and labor taxes for a model economy in which heterogeneous households face uninsurable labor income risk. The stochastic process for labor earnings we construct is consistent with empirical estimates of earnings risk,...

This paper addresses the puzzle that public services in some developing countries, especially in Africa, are poor despite large public expenditure. The intertemporal model here studies a government’s optimal choice between redistribution and public investment. Ethnic diversity and political...

This paper studies a policymaker’s optimal choice between redistribution and efficient public investment. Under political instability, there is myopic government behavior which results in underinvestment. Above some critical value of political instability, it is optimal not to invest at all....

A stochastic general equilibrium model is set up in order to analyse whether automatic stabilizers are a good tool in terms of mitigating risk. It is found that the potential benefits to be derived from automatic stabilizers depend on various factors including the degree of real wage rigidity...

This paper describes a simple model of technology adoption which combines the two engines of growth emphasized in the recent growth literature: human capital accumulation and technological progress. Our model economy does not create new technologies, it simply adopts those that have been created...