In an overlapping generations economy with incomplete insurance markets, the introduction of an employment fund-akin to the one introduced in Austria in 2003, also known as 'Austrian backpack'-can enhance production efficiency and social welfare. It complements the two classical systems of...

This paper presents a two-period overlapping-generations model in which (i) firms create environmentally harmful emissions as by-products of production, and (ii) social security tax revenue from the working young is transferred to the retired elderly as pay-as-you go social security benefits. In...

Subjective expectations about future policy play an important role in individuals' welfare. We examine how workers' expectations about pension reform vary with proximity to reforms, information cost, and aggregate information acquisition. We construct a new pan-European dataset of reform...

We evaluate the likelihood of different reforms of an unsustainable pay-as-you-go pension system. Individual agents' preferences are determined for 15 age groups and all possible levels of wealth to account for expectations held prior to a reform. Moreover, we introduce "indifference bands" in...

The labor market effects of pension reform stem from retirement behavior and from job search and hours worked of prime age workers. This paper investigates the impact of four often proposed policy measures for sustainable pensions: strengthening the tax benefit link, moving from wage to price...

This paper shows that a secular stagnation equilibrium as proposed by Eggertsson and Mehrotra (2014) is E-stable. This is in contrast to the often studied liquidity trap equilibrium that exists in representative agent New Keynesian models at the zero lower bound when there is active monetary...

The adaptive learning approach has been fruitfully employed to model the formation of aggregate expectations at the macroeconomic level, as an alternative to rational expectations. This paper uses adaptive learning to understand, instead, the formation of expectations at the micro-level, by...