Eytan Sheshinski, Yoram Weiss; Inflation and Costs of Price Adjustment, The Review of Economic Studies, Volume 44, Issue 2, 1 June 1977, Pages 287–303, htt

This paper examines the annuity aspect of social security within the framework of an overlapping-generations model. The duration of life is assumed to be uncertain. Under a fully funded system, demand for social security is determined by each generation so as to maximize expected lifetime utility, taking into account the welfare of future generations. Under a pay-as-you-go system with intergenerational transfers, demand for retirement benefits by the working population takes into account taxes paid by descendants. It is shown that the two modes of finance are equivalent in terms of all real aggregates. Effects of changes in expected lifetime and in the birth rate are analyzed. Starting at the optimal level, a compulsory balanced increase in social security taxes and benefits is shown to increase short-run savings.

IN THE ANALYSIS of economic data the investigator is frequently provided with only the simple sum of some elementary variables. The elementary variables are known to be perfect substitutes (i.e., to have the same effect) in some contexts, but not in all the relevant ones. Familiar examples are hours of work at possibly different jobs, hours of leisure spent at different activities, number of trips abroad, cigarette consumption (of possibly different brands). The question, naturally, is under what conditions can we expect that such aggregates will satisfy the same restrictions as those imposed by the theory on the elementary variables? As an answer we suggest the following variation of Hicks' [3, p. 33] composite good theorem: A simple sum of elementary goods can be treated as a single good if their (properly normalized) prices vary so as to keep all within group differences constant.2 We shall illustrate the proposition in the context of standard demand theory. Define the expenditure function: m (u, p) minm 1 l7pixi, subject to u(x1.. .xn) = u. Suppose that

This paper investigates the implications of social rewards on the allocation of talent in society and consequently on the process of economic growth. We consider two sources of heterogeneity among workers: nonwage income and innate ability. A greater emphasis on status may induce the "wrong" individuals, that is, those with low ability and high wealth, to acquire schooling, causing workers with high ability and low wealth to leave the growth-enhancing industries. This crowding-out effect, taken alone, discourages growth. Growth may be enhanced by a more egalitarian distribution of wealth, which reduces the demand for status.

This article develops and estimates an on‐the‐job search model of the entry of highly skilled immigrants from the former Soviet Union into the Israeli labor market. The estimated parameters of the model, together with information on the wages of immigrants from earlier waves, imply that, on average, immigrants can expect lifetime earnings to fall short of the lifetime earnings of comparable natives by 57%. Of this figure, 14 percentage points reflect frictions associated with nonemployment and job distribution mismatch, and 43 percentage points reflect the gradual adaptation of imported schooling and experience to the local labor market.

[This paper is concerned with the sources of variation in the earnings of American scientists over the decade 1960-70. It focuses on sources of variation over time as well as at a point in time. Earnings variation over time is decomposed into sources due to measurable variables representing an earnings function, a random effect individual variance component in the level of earnings, a random effect individual component in earnings growth, and a serially correlated transitory component. Maximum likelihood estimates of the implied parameters are presented and a method for obtaining GLS estimates of the earnings regression function, when the residual variance components are given, is explored.]

The consequences of introducing risk-averse workers with a known, finite retirement age into a simple job-matching framework are explored. The job-matching model includes two jobs. In the "primary" job, workers and firms learn about the worker's productivity by observing his output over time. In the "secondary" job, productivity of any worker is known with certainty at the outset. Workers start off in the primary job but, based on their observed performance, may choose to switch to the secondary job. The model is developed in two stages. First, the finite retirement age is introduced while the usual assumption of risk-neutral workers is retained. In this model it is shown that all workers who achieve at least a certain cumulative output record, denoted r*, by a certain age, denoted T, will thereafter remain in the primary job until retirement. Those who do not achieve r* by age T switch to the secondary job at or before age T and remain there. Second, risk aversion is introduced along with finite retirement age. Here the turnover aspects of the equilibrium are similar to the risk-neutral case, but firms provide workers with wage insurance. This takes the form of wages that are downward rigid. As a result, it may be optimal ex ante for workers to delegate the job choice decision to the employer, and, ex post, not all separations will be voluntary for the work r.

Between-family differences in expenditures and output reflect the effect of simultaneous increases in children's ability on the willingness of parents to transfer resources to them. Within-family differences also reflect the attitudes of parents toward disparity among children. In this paper we characterize the conditions on parents' preferences that determine whether between-family differences exceed within-family differences. For additive utility, within-family differences in expenditures always exceed between-family differences. This may also be true for the max-min utility function if an increase in ability reduces the marginal utility of income. Within-family differences in output (utility or income) can also exceed between-family differences. In this case, the implication for income distribution is that equality is enhanced by a higher correlation of ability between brothers.