New: Social Security Privatization: A Simple Proposal
Date Posted:
Jan 17,
2015
This paper proposes a Social Security reform for the United States that gradually, but ultimately fully, privatizes the system. This proposal follows the “no-harm, no-foul” principle in that it preserves the benefits of older generations and yet promises the same or higher retirement benefits for the young. As such it is both economically and politically feasible.The paper demonstrates that the transition to a privatized system can be financed without any additional taxation, including additional payroll taxation. Our approach is likely to improve U.S. national saving and work incentives compared to the current system. It also has advantages over other privatization proposals that recommend or may require additional taxation to finance the transition. The paper points out, however, that there is only a limited window of opportunity for implementing such a reform of the U.S. Social Security system.
New: Marginal Tax Rates and Income Inequality in a Life-Cycle Model
Date Posted:
Jan 17,
2015
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 allows us to examine marginal tax rate structures in their literal form. We find that distortions associated with particular marginal tax rate structures have sizable effects on income inequality in a reasonably quantified life-cycle setting: In our baseline experiments, the change in steady-state income inequality under 1989 U.S. income tax rates vis-à-vis 1984 rates is about half as large as the change actually seen in the data over those two years, when measured in terms of a monetary metric derived from Gini coefficients.
New: An Interview with Neil Wallace
Date Posted:
Dec 18,
2013
A few years ago we sat down with Neil Wallace and had two lengthy, free-ranging conversations about his career and, generally speaking, his views on economics. What follows is a distillation of these conversations.
New: Firm-Specific Capital, Nominal Rigidities and the Business Cycle
Date Posted:
Mar 11,
2010
This paper formulates and estimates a three-shock US business cycle model. The estimated model accounts for a substantial fraction of the cyclical variation in output and is consistent with the observed inertia in inflation. This is true even though firms in the model reoptimize prices on average once every 1.8 quarters. The key feature of our model underlying this result is that capital is firm-specific. If we adopt the standard assumption that capital is homogeneous and traded in ...
REVISION: Firm-Specific Capital, Nominal Rigidities and the Business Cycle
Date Posted:
Oct 30,
2007
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 model is consistent with post-war U.S. evidence on inflation inertia even though firms re-optimize prices on average once every 1.5 quarters. The key feature of our model is that capital is firm-specific ...
New: The Timing of Intergenerational Transfers, Tax Policy, and Aggregate Savings
Date Posted:
Aug 08,
2007
No abstract is available for this paper.
Simulating U.S. Tax Reform
Date Posted:
Jun 10,
2007
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 relief, and a progressive variant of the flat tax called the `X tax.` The model incorporates intragenerational heterogeneity and kinked budget constraints. It predicts major macroeconomic gains ...
New: Borrowing Constraints and Two-Sided Altruism With an Application to Social Security
Date Posted:
Dec 28,
2006
No abstract is available for this paper.
Firm-Specific Capital, Nominal Rigidities and the Business Cycle
Date Posted:
May 11,
2005
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 that resolves this apparent micro/macro conflict. Our model is consistent with post-war US evidence on inflation inertia even though firms re-optimize prices on average once every 1.5 quarters. The key feature of our model is that capital is firm-specific and ...
Firm-Specific Capital, Nominal Rigidities and the Business Cycle
Date Posted:
May 11,
2005
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 model is consistent with post-war U.S. evidence on inflation inertia even though firms re-optimize prices on average once every 1.5 quarters. The key feature of our model is that capital is firm-specific ...