scholarly journals The Friedman rule in an overlapping-generations model with nonlinear taxation and income misreporting

2014 ◽  
Vol 119 ◽  
pp. 10-23 ◽  
Author(s):  
Firouz Gahvari ◽  
Luca Micheletto
Keyword(s):  
Overlapping Generations ◽  
Overlapping Generations Model ◽  
Friedman Rule

Optimal Monetary Policy in an Overlapping Generations Model with Search Theoretic Monetary Exchange

2017 ◽  
Vol 17 (2) ◽  
Author(s):  
Ryoji Hiraguchi
Keyword(s):  
Overlapping Generations ◽  
Optimal Level ◽  
Optimal Monetary Policy ◽  
Overlapping Generations Model ◽  
Friedman Rule ◽  
Lump Sum ◽  
Decentralized Markets ◽  
The Government ◽  
Decentralized Market ◽  
Specific Tax

AbstractIt is well-known that in the monetary OLG models, a deviation from the Friedman rule can improve welfare because it generates intergenerational wealth transfers; however, the rule becomes optimal if the age-specific lump-sum tax policy is available. We revisit the issue using a microfounded model of money with centralized and decentralized markets. The individuals live for two periods. The young individuals work, receive wage income and hold money and capital in the centralized market. They also trade goods in the decentralized markets either as a buyer or a seller. Only money is accepted as a means of payment in the decentralized markets. The old individuals consume all their wealth in the centralized market. The quantity in the decentralized market negatively depends on the seller’s wealth, because the marginal utility of consumption in the centralized market is diminishing, but the buyer takes it as exogenous. Therefore, the equilibrium wealth exceeds the socially optimal level under the Friedman rule. A positive nominal interest rate makes money holdings costly, reduces wealth and improves welfare, even if the government optimally uses the age-specific tax.

scholarly journals INCOME INEQUALITY, MOBILITY, AND THE WELFARE STATE: A POLITICAL ECONOMY MODEL

2012 ◽  
Vol 17 (6) ◽  
pp. 1198-1226 ◽  
Author(s):  
Luca Bossi ◽  
Gulcin Gumus
Keyword(s):  
Income Inequality ◽  
Welfare State ◽  
Social Insurance ◽  
Overlapping Generations ◽  
Tax Rates ◽  
Overlapping Generations Model ◽  
Public Programs ◽  
Transfer Payments ◽  
Set Up ◽  
The Welfare State

In this paper, we set up a three-period stochastic overlapping-generations model to analyze the implications of income inequality and mobility for demand for redistribution and social insurance. We model the size of two different public programs under the welfare state. We investigate bidimensional voting on the tax rates that determine the allocation of government revenues among transfer payments and old-age pensions. We show that the coalitions formed, the resulting political equilibria, and the demand for redistribution crucially depend on the level of income inequality and mobility.

scholarly journals Endogenous Agency Problems and the Dynamics of Rents

2020 ◽  
Vol 87 (6) ◽  
pp. 2542-2567
Author(s):  
B Biais ◽  
A Landier
Keyword(s):  
Overlapping Generations ◽  
Agency Problems ◽  
Overlapping Generations Model ◽  
Complex Tasks ◽  
Complex Skills ◽  
Do So

Abstract While potentially more productive, more complex tasks generate larger agency rents. Agents therefore prefer to acquire complex skills, to earn large rents. In our overlapping generations model, their ability to do so is kept in check by competition with predecessors. Old agents, however, are imperfect substitutes for young ones, because the latter are easier to incentivize, thanks to longer horizons. This reduces competition between generations, enabling young managers to go for larger complexity than their predecessors. Consequently, equilibrium complexity and rents gradually increase beyond what is optimal for the principal and for society.

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