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Tanaka Yasuhito - One of the best experts on this subject based on the ideXlab platform.
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Involuntary unemployment in Overlapping Generations model due to instability of the economy and fiscal policy for full-employment
2021Co-Authors: Tanaka YasuhitoAbstract:The existence of involuntary unemployment advocated by J. M. Keynes is a very important problem of the modern economic theory. Using a three-Generations Overlapping Generations model, we show that the existence of involuntary unemployment is due to the instability of the economy. Instability of the economy is the instability of the difference equation about the equilibrium price around the full-employment equilibrium, which means that a fall in the nominal wage rate caused by the presence of involuntary unemployment further reduces employment. This instability is due to the negative real balance effect that occurs when consumers’ net savings (the difference between savings and pensions) are smaller than their debt multiplied by the marginal propensity to consume from childhood consumption. Also we present a discussion about fiscal policy by seigniorage to realize full-employment
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Microeconomic foundation for Phillips curve with three-periods Overlapping Generations model and negative real balance effect
2020Co-Authors: Tanaka YasuhitoAbstract:We show a negative relation between the inflation rate and the unemployment rate , that is, the Phillips curve using a three-periods Overlapping Generations (OLG) model with childhood period and pay-as-you-go pension for older generation under monopolistic competition. We consider the effects of a change in nominal wage rate with negative real balance effect and the effects of an exogeneous change in labor productivity. In a three periods OLG model there may exist a negative real balance effect. A fall (or rise) in nominal wage rate induces a fall (or rise) in the price, then by negative real balance effect the unemployment rate rises (or falls), and we get a negative relation between the inflation rate and the unemployment rate. This conclusion is based on the premise of utility maximization of consumers and profit maximization of firms. Therefore, we presented a microeconomic foundation of the Phillips curve. About the effects of a change in labor productivity we obtain similar results. We also examine the effects of fiscal policy financed by seigniorage
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Involuntary unemployment with divisible labor supply with a three-periods Overlapping Generations model under monopolistic competition
2020Co-Authors: Tanaka YasuhitoAbstract:We show the existence of involuntary unemployment without assuming wage rigidity. We derive involuntary unemployment by considering utility maximization of consumers and profit maximization of firms in an Overlapping Generations model under monopolistic competition with increasing or constant returns to scale technology and homothetic preferences of consumers. Indivisibility of labor supply may be a ground for the existence of involuntary unemployment. However, we show that there exists involuntary unemployment even when labor supply is divisible. The existence involuntary unemployment in our model is due to that we use an Overlapping Generations model of consumptions and labor supply. In a two-periods Overlapping Generations model it is possible that a reduction of the nominal wage rate reduces unemployment. However, if we consider a three-periods Overlapping Generations model including a childhood period, a reduction of the nominal wage rate does not necessarily reduce unemployment
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Involuntary unemployment under ongoing nominal wage rate decline in Overlapping Generations model
2020Co-Authors: Tanaka YasuhitoAbstract:We analyze involuntary unemployment based on consumers’ utility maximization and firms’ profit maximization behavior with ongoing nominal wage rate decline. We consider a three-periods Overlapping Generations (OLG) model with a childhood period as well as younger and older periods under monopolistic competition with increasing, decreasing or constant returns to scale technology. We examine the existenbce of involuntary unemployment in that model with ongoing mominal wage rate decline (or deflation). Even if the nominal wage rate declines, we have a steady state with involuntary unemployment and constant output and employment. We need budget deficit or budget surplus to maintain the steady state depending on whether real balance effect is positive or negative. Also we examine the possibility to achieve full-employment by fiscal polic
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Divisibility and indivisibility of labor supply, and involuntary unemployment: A perfect competition model
2020Co-Authors: Tanaka YasuhitoAbstract:We show the existence of involuntary unemployment without assuming wage rigidity. We derive involuntary unemployment by considering utility maximization of consumers and profit maximization of firms in an Overlapping Generations model under perfect competition with decreasing or constant returns to scale technology. Indivisibility of labor supply may be a ground for the existence of involuntary unemployment. However, we show that under some conditions there exists involuntary unemployment even when labor supply is divisible
Ward E Romp - One of the best experts on this subject based on the ideXlab platform.
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a life cycle Overlapping Generations model of the small open economy
Social Science Research Network, 2007Co-Authors: Ben J Heijdra, Ward E RompAbstract:We construct an Overlapping Generations model for the small open economy incorporating a realistic description of the mortality process. With age-dependent mortality, the typical life-cycle pattern of consumption and saving results from the maximizing behaviour of individual households. Our ‘Blanchard-Yaari-Modigliani’ model is used to analytically study a number of typical shocks affecting the small open economy, namely a balanced-budget public spending shock, a temporary Ricardian tax cut, and an interest rate shock. The demographic details matter a lot—both the impulse-response functions and the welfare profiles (associated with the different shocks) are critically affected by them. These demographic details furthermore do not wash out in the aggregate. The model is flexible and can be applied to a wide variety of theoretical and policy issues.
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a life cycle Overlapping Generations model of the small open economy
Research Papers in Economics, 2005Co-Authors: Ben J Heijdra, Ward E RompAbstract:In this paper we construct an Overlapping Generations model for the small open economy incorporating a realistic description of the mortality process. With agedependent mortality, the typical life-cycle pattern of consumption and saving results from the maximizing behaviour of individual households. Our ?Blanchard-Yaari-Modigliani?model is used to analytically study a number of typical shocks affecting the small open economy, namely a balanced-budget public spending shock, a temporary Ricardian tax cut, and an interest rate shock. The demographic details matter a lot?both the impulse-response functions and the welfare profiles (associated with the different shocks) are critically affected by them. These demographic details furthermore do not wash out in the aggregate. The model is flexible and can be applied to a wide variety of theoretical and policy issues.
Sebastian Rausch - One of the best experts on this subject based on the ideXlab platform.
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the intergenerational incidence of green tax reform
Climate Change Economics, 2018Co-Authors: Sebastian Rausch, Hidemichi YonezawaAbstract:We examine the lifetime incidence and intergenerational distributional effects of an economy-wide carbon tax swap using a numerical dynamic general equilibrium model with Overlapping Generations of...
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optimal dynamic carbon taxation in a life cycle model with distortionary fiscal policy
Research Papers in Economics, 2014Co-Authors: Sebastian Rausch, Jan AbrellAbstract:We quantitatively characterize optimal carbon, capital, and labor income taxes in an economy-climate integrated assessment model that features Overlapping Generations and distortionary fiscal policy. First, we show that the optimal carbon tax significantly differs from the Pigouvian carbon levy in a first-best setting with Overlapping Generations in which fully rational households optimize over finite lifetimes. The key driving force behind this result is the life-cycle structure of the our model, in conjunction with endogenously chosen labor supply. We also show that the assumed labor supply elasticity is important for the size of deviation of the optimal carbon tax from the Pigouvian tax, but not the existence of the deviation from Pigouvian pricing. Second, interacting life-cycle household behavior with distortionary fiscal policy is shown to further drive a wedge between the second-best optimal carbon tax and a Pigouvian carbon levy.
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fiscal consolidation and climate policy an Overlapping Generations perspective
Energy Economics, 2013Co-Authors: Sebastian RauschAbstract:Abstract This paper examines the distributional and efficiency impacts of public debt consolidation financed through a carbon tax employing a dynamic general-equilibrium model with Overlapping Generations of the U.S. economy. The numerical model features government taxes and spending and a multi-sectoral production structure including intermediate production, specific detail on the energy sector both in terms of primary energy carriers and energy-intensive industries, and sector- and fuel-specific carbon inputs. In contrast to revenue-neutral carbon tax swaps, using the carbon revenue for deficit reduction implies a relaxation of future public budgets as debt repayment results in lower future interest obligations. While intergenerational welfare impacts depend importantly on what tax recycling instrument is used, we find that combining public debt consolidation with a carbon policy entails the possibility of sustained welfare gains for future Generations. If social discount rates are sufficiently low or if social preferences exhibit a large aversion with respect to intergenerational inequality, combining fiscal consolidation and climate policy may offer the chance for societal gains even without considering potential benefits from averted climate change.
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fiscal consolidation and climate policy an Overlapping Generations perspective
Research Papers in Economics, 2013Co-Authors: Sebastian RauschAbstract:We examine the distributional and e ciency impacts of climate policy in the context of fiscal consolidation in a dynamic general-equilibrium Overlapping Generations model of the US economy. The model includes a disaggregated production structure, including energy sector detail and advanced low- or zero-carbon energy technologies, and detail on government taxes and spending. In contrast to revenue-neutral carbon tax swaps, using the carbon revenue for deficit reduction implies a relaxation of future public budgets as debt repayment results in lower interest obligations. While we show that the intergenerational welfare impacts depend importantly on what tax recycling instrument is used, we find that combining debt consolidation with a carbon policy entails the possibility of sustained welfare gains for future Generations. We thus argue that combining fiscal and climate policy may o er the chance for positive societal gains (without considering potential benefits from averted climate change). Importantly, this may enhance the political support for revenue-raising climate policies that are framed over the next couples of decades.
Ben J Heijdra - One of the best experts on this subject based on the ideXlab platform.
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a life cycle Overlapping Generations model of the small open economy
Social Science Research Network, 2007Co-Authors: Ben J Heijdra, Ward E RompAbstract:We construct an Overlapping Generations model for the small open economy incorporating a realistic description of the mortality process. With age-dependent mortality, the typical life-cycle pattern of consumption and saving results from the maximizing behaviour of individual households. Our ‘Blanchard-Yaari-Modigliani’ model is used to analytically study a number of typical shocks affecting the small open economy, namely a balanced-budget public spending shock, a temporary Ricardian tax cut, and an interest rate shock. The demographic details matter a lot—both the impulse-response functions and the welfare profiles (associated with the different shocks) are critically affected by them. These demographic details furthermore do not wash out in the aggregate. The model is flexible and can be applied to a wide variety of theoretical and policy issues.
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a life cycle Overlapping Generations model of the small open economy
Research Papers in Economics, 2005Co-Authors: Ben J Heijdra, Ward E RompAbstract:In this paper we construct an Overlapping Generations model for the small open economy incorporating a realistic description of the mortality process. With agedependent mortality, the typical life-cycle pattern of consumption and saving results from the maximizing behaviour of individual households. Our ?Blanchard-Yaari-Modigliani?model is used to analytically study a number of typical shocks affecting the small open economy, namely a balanced-budget public spending shock, a temporary Ricardian tax cut, and an interest rate shock. The demographic details matter a lot?both the impulse-response functions and the welfare profiles (associated with the different shocks) are critically affected by them. These demographic details furthermore do not wash out in the aggregate. The model is flexible and can be applied to a wide variety of theoretical and policy issues.
Rowena A Pecchenino - One of the best experts on this subject based on the ideXlab platform.
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the effects of annuities bequests and aging in an Overlapping Generations model of endogenous growth
The Economic Journal, 1995Co-Authors: Rowena A Pecchenino, Patricia S PollardAbstract:In this paper, we examine the effects of introducing actuarially fair annuity markets into an Overlapping Generations model of endogenous growth. We find the complete annuitization of agents' wealth is not, in general, dynamically optimal; that the degree of annuitization that is dynamically optimal depends nonmonotonically on the expected length of retirement and on the pay-as-you-go social security tax rate. We find that the government has an incentive to restrict the availability of actuarially fair annuities contracts, and that it can often move the economy from a pay-as-you-go to a fully-funded social security system via voluntary contributions to a government sponsored, actuarially fair pension today accompanied by reductions in social security taxes tomorrow.
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an Overlapping Generations model of growth and the environment
The Economic Journal, 1994Co-Authors: Andrew John, Rowena A PeccheninoAbstract:This article analyzes the potential conflict between economic growth and the maintenance of environmental quality in an Overlapping Generations model. Short-lived individuals make decisions which have long-lasting effects on both factor productivity and the environment. The model provides a theoretical explanation of observed correlations between environmental quality and income, whereby economic growth is associated first with declines, then improvements, in environmental quality. It suggests circumstances in which multiple Pareto-ranked steady-state equilibria may arise, and in which sustained growth of both capital and environmental quality may occur. Overmaintenance of the environment, analogous to dynamically inefficient overaccumulation of capital, may emerge. Copyright 1994 by Royal Economic Society.
