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.

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

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

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

Government Debt as Insurance against Macroeconomic Risk

Is there a role for debt beyond curing overaccumulation of capital? Does dynamic efficiency and the infeasibility of debt Ponzi schemes eliminate any Pareto-improving role for a government in a competitive economy with complete markets? Is there an optimal maturity structure of public debt? Using a stochastic Diamond OLG model, we tackle these questions. We show that government debt can Pareto-improve upon market allocations through a mechanism that resembles a Ponzi scheme. But instead of rolling over safe debt, we can interpret our scheme as one that rolls over an insurance contract generation for generation. This kind of dynamic risk-sharing can provide insurance against macroeconomic risk. Using the widespread welfare concept of interim Pareto optimality, we ensure that all generations voluntarily participate in our insurance scheme. Yet, the scheme cannot be replicated on capital markets. Exploiting information from the term structure of interest rates, we derive testable conditions both for dynamic efficiency and for interim Pareto optimality in terms of interest rates. We provide evidence that real world economies, while being dynamically efficient, are likely not to be interim Pareto optimal. We conclude that there may be a welfareimproving role for a well-designed maturity structure of debt

BAY61-3606 Affects the Viability of Colon Cancer Cells in a Genotype-Directed Manner

Background: K-RAS mutation poses a particularly difficult problem for cancer therapy. Activating mutations in K-RAS are common in cancers of the lung, pancreas, and colon and are associated with poor response to therapy. As such, targeted therapies that abrogate K-RAS-induced oncogenicity would be of tremendous value. Methods: We searched for small molecule kinase inhibitors that preferentially affect the growth of colorectal cancer cells expressing mutant K-RAS. The mechanism of action of one inhibitor was explored using chemical and genetic approaches. Results: We identified BAY61-3606 as an inhibitor of proliferation in colorectal cancer cells expressing mutant forms of K-RAS, but not in isogenic cells expressing wild-type K-RAS. In addition to its anti-proliferative effects in mutant cells, BAY61-3606 exhibited a distinct biological property in wild-type cells in that it conferred sensitivity to inhibition of RAF. In this context, BAY61-3606 acted by inhibiting MAP4K2 (GCK), which normally activates NFκβ signaling in wild-type cells in response to inhibition of RAF. As a result of MAP4K2 inhibition, wild-type cells became sensitive to AZ-628, a RAF inhibitor, when also treated with BAY61-3606. Conclusions: These studies indicate that BAY61-3606 exerts distinct biological activities in different genetic contexts