In this paper, the authors develop an applied general equilibrium model to examine the effects of tax-favored retirement accounts on the capital stock. The results from their benchmark model indicate that a modest individual retirement account (IRA) contribution limit similar to that in effect during the early 1980s raises the steady-state capital stock by 6.18 percent; approximately 9 percent of IRA contributions constitutes incremental saving. The authors' results lend support to recent suggestions that retirement accounts with favorable tax treatment only for contributions above some base amount might provide more stimulus to saving than conventional IRAs.
The authors use a two-period matching model with initial uncertainty about productivities of participants to analyze incentives for early contracting or unraveling. Unraveling provides insurance in the absence of complete markets but causes inefficient assignments. Unraveling is more likely the smaller the applicant pool, the smaller the proportion of more-promising applicants, and the greater the heterogeneity in the pool. Banning early contracts hurts firms and benefits less-promising applicants; the effects on more-promising applicants depend on how the gains from early contracts are shared. Ex post buyouts eliminate inefficient assignments and more-promising applicants always unravel.
This paper establishes a methodology for valuing the impact of large-scale ecological changes in a market. Given the large capital stocks inherent in most ecological systems, the dynamic nature of most ecological change, and the dynamic response of markets, it is critical to build dynamic models to capture the resulting effects. This paper demonstrates how to construct such a model using the impacts of climate change on U.S. timber markets as an example. Across a wide range of scenarios and models, warming is predicted to expand timber supplies and thus benefit U.S. timber markets.
The Cold War’s ending has brought mounting pressures to recognize national science and technology research systems. Yet, by comparison with what has been learned already concerning institutional arrangements and business strategies affecting corporate RD investments, surprisingly little is known about the economic origins and effects of the corresponding institutional infrastructures shaping the world of “academic” science, and the organization and conduct of publicly supported RD more generally. The desirability of closing this particular lacuna in the economics and economic-history literatures has been just as evident to economists concerned with extending the analysis of modern institutions as to those who have begun to approach the whole area of science and technology studies from the perspectives and methods of industrial-organization economics. [1] Even before the “new economics of science” had begun to direct attention to such a program, Douglass North (1990 p. 75) saw a significant challenge and a promising opportunity in explicit exploration of “the connecting links between institutional structures... and incentives to acquire pure knowledge.” The research reported here has accepted that challenge (see also the other papers in this session: Timothy Lenoir [1998], Christophe Lecuyer [1998], and Marjory S. Blumenthal [1998]). It is focused upon key episodes in the institutional evolution of “public science,” and its complex and changing relationship to the other organizational spheres of contemporaneous scientific activity: those in which research was conducted under “proprietary rules” for industrial profit-goals, and “defense-related” science and engineering knowledge was sought under conditions of restricted access to information concerning methods, findings, and their actual and potential applications.
Missing from recent discussions of tax reform is any systematic analysis of the effects of various tax proposals on skill formation. This gap in the literature in empirical public finance is due to the absence of any empirically based general equilibrium models with both human capital formation and physical capital formation that are consistent with observations on modern labor markets. This paper is a progress report on our ongoing research on formulating and estimating dynamic general equilibrium models with endogenous heterogeneous human capital accumulation. Our model explains many features of rising wage inequality in the U.S. economy (James Heckman, Lance Lochner and Christopher Taber, 1998). In this paper, we use our model to study the impacts on skill formation of proposals to switch from progressive taxes to flat income and consumption taxes. For the sake of brevity, we focus on steady states in this paper, although we study both transitions and steady states in our research.
In this brief paper I explore several issues related to [U.S.] demographic change and the political economy of public education.... I describe the existing empirical evidence that suggests that older and childless voters are less likely to support public-school spending than younger voters with children. I then note several unresolved issues about the degree to which rational self-interest should lead older voters to vote for low levels of public-school spending. (EXCERPT)