mic Efficiency and Pareto Optimality in a Stochastic OLG Model with Production and Social Security

We analyze the interaction between risk sharing and capital accumulation in a stochastic OLG model with production. We give a complete characterization of interim Pareto optimality. Our characterization also subsumes equilibria with a PAYG social security system. In a competitive equilibrium interim Pareto optimality is equivalent to intergenerational exchange efficiency, which in turn implies dynamic efficiency. Furthermore, dynamic efficiency does not rule out a Pareto-improving role for a social security system. Social security can provide insurance against macroeconomic risk, namely aggregate productivity risk in the second period of life (old age) through dynamic risk sharing. We briefly relate our results to models without uncertainty where the notions of exchange efficiency, dynamic efficiency and interim Pareto optimality are all equivalent in a competitive equilibrium.Stochastic OLG Model, Dynamic Efficiency, Interim Pareto Optimality, Social Security, Risk Sharing

Optimal Taxation in a Simple Model of Human Capital Accumulation

This paper studies optimal taxation in dynamic economies with a simple form of human capital accumulation as considered in Bull (1993). We show that in a Ramsey equilibrium along any balanced growth path, the taxes on wage income and (physical) capital income must be zero. Under the assumption on preferences of Bull (1993), we extend his result by showing that along a balanced growth all optimal taxes are necessarily zero.

Report on the Alternative Platform Observer Program in North Carolina: March 2006 to March 2007

In February 2006, an Alternative Platform Observer Program (APP) was implemented in North Carolina (NC) to observe commercial gillnet trips by small vessels [<24 ft (7.2 m)] in nearshore waters out to three nm (5.6 km). Efforts began with outreach to the fishing industry while simultaneously gathering information to be incorporated in a Database of Fishermen. From 30 March 2006 through 31 March 2007, 36 trips were observed. Observed trips of the NC nearshore gillnet fishery targeted seven species: kingfish (Menticirrhus spp.), Spanish mackerel (Scomberomorus maculatus), spiny dogfish (Squalus acanthias), spot (Leiostomus xanthurus), spotted seatrout (Cynoscion nebulosus), striped bass (Morone saxatilis), and weakfish (Cynoscion regalis). Of the 36 trips, 20 (55.6%) were with vessels that were new to the Northeast Fisheries Observer Program (NEFOP), having never carried an observer. Based on the landings data for small vessels from North Carolina Division of Marine Fisheries (NCDMF), the APP has achieved 10.1% coverage by number of trips and 4.0% by pounds landed. No incidental takes of bottlenose dolphins were observed by the APP, although bottlenose dolphins were sighted during 19 (52.8%) observed trips. The APP has drastically increased the number of observed trips of small vessels in the nearshore waters of NC. When combined with trips observed by NEFOP (n=205), the APP resulted in a 15.6% increase in the number of observed gillnet trips. (PDF contains 34 pages

Dynamic Efficiency and Pareto Optimality in a Stochastic OLG Model with Production and Social Security

We analyze the interaction between risk sharing and capital accumulation in a stochastic OLG model with production. We give a complete characterization of interim Pareto optimality. Our characterization also subsumes equilibria with a PAYG social security system. In a competitive equilibrium interim Pareto optimality is equivalent to intergenerational exchange efficiency, which in turn implies dynamic efficiency. Furthermore, dynamic efficiency does not rule out a Pareto-improving role for a social security system. Social security can provide insurance against macroeconomic risk, namely aggregate productivity risk in the second period of life (old age) through dynamic risk sharing. We briefly relate our results to models without uncertainty where the notions of exchange efficiency, dynamic efficiency and interim Pareto optimality are all equivalent in a competitive equilibrium

Dynamic Efficiency and Pareto Optimality in a Stochastic OLG Model with Production and Social Security

We analyze the interaction between risk sharing and capital accumulation in a stochastic OLG model with production. We give a complete characterization of interim Pareto optimality. Our characterization also subsumes equilibria with a PAYG social security system. In a competitive equilibrium interim Pareto optimality is equivalent to intergenerational exchange efficiency, which in turn implies dynamic efficiency. Furthermore, contrary to the case of certainty, dynamic efficiency does not rule out a Pareto-improving role for a social security system. Social security can provide insurance against macroeconomic risk, namely aggregate productivity risk in the second period of life (old age) through dynamic risk sharing. The mechanism through which social security can Pareto-improve market allocations resembles a Ponzi scheme. But instead of rolling over debt, we can interpret our scheme as one that raises contributions and then rolls over an insurance contract

Fostering Within-Family Human Capital Investment: An Intragenerational Insurance Perspective of Social Security

We develop a general equilibrium stochastic OLG model with heterogenous households. Households differ with respect to their productivity. Productivity depends stochastically on parents' unobservable investment in their child's human capital and an aggregate productivity shock. We introduce a PAYG social security system that conditions benefits on the aggregate wage sum and on the wage of one's child. We analyze the effects of such a social security system on the endogenous distribution of human capital and compare it to real world systems, which typically do not condition benefits on the wages of one's children. We decompose the effects of social security on the investment in human capital into an incentive effect, an insurance effect, a redistributive effect and a general equilibrium effect. Furthermore, we discuss the effects of social security on the long run distribution of human capital. Our approach suggests a novel role for a well-designed social security system: it can foster human capital accumulation and act as intragenerational insurance against human capital risk

Non-Manipulable Domains for the Borda Count

We characterize the preference domains on which the Borda count satisfies Arrow's ``independence of irrelevant alternatives" condition. Under a weak richness condition, these domains are obtained by fixing one preference ordering and including all its cyclic permutations (``Condorcet cycles"). We then ask on which domains the Borda count is non-manipulable. It turns out that it is non-manipulable on a broader class of domains when combined with appropriately chosen tie-breaking rules. On the other hand, we also prove that the rich domains on which the Borda count is non-manipulable for all possible tie-breaking rules are again the cyclic permutation domains

The Zilcha criteria for dynamic inefficiency reconsidered

We reconsider necessary and sufficient conditions for dynamic inefficiency given in Zilcha (J Econ Theory 52:364-379, 1990, J Econ Theory 55:1-16, 1991) and a critique by Rangazas and Russell (2005). First, we show that the characterization given in Zilcha (1990) for nonstationary economies is correct and correct Zilcha's proof. Second, using this insight, we complement Rangazas and Russell's (Econ Theory 26:701-716, 2005) discussion of the counterexamples to Zilcha (J Econ Theory 55:1-16, 1991). Third, we discuss consequences of our results for applied tests of (in-)efficiency based on the Zilcha criteri