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The Political Economy of Social Security and Public Goods Provision in a Borrowing-constrained Economy
Get PDF* Revised: [09-38, 2009]This paper introduces an overlapping-generations model with earnings hetero-geneity and borrowing constraints. The labor income tax and the allocation oftax revenue across social security and forward intergenerational public goods aredetermined in a bidimensional majoritarian voting game played by successive gen-erations. The political equilibrium is characterized by an ends-against-the-middleequilibrium where low- and high-income individuals form a coalition in favor of alow tax rate and less social security while middle-income individuals favor a hightax rate and greater social security. Government spending then shifts from socialsecurity to public goods provision if higher wage inequality is associated with theborrowing constraint and a low interest-rate elasticity of consumption
An Experimental Study of Japanese Procurement Auctions with Endogenous Minimum Prices
Get PDFISER discussion paperJune 2009, Revised July 2010Several European countries and many Japanese local governments began including endogenous minimum prices (EMPs) in first-price auctions (FPAs) in their public procurements. The EMP is calculated based on its relation to the average of all bids or to some lowest bids. Any bid lower than the EMP is considered abnormally low and is excluded from the procurement procedure. Producers who join this new auction institution have the incentive to raise their bids and pull up the EMP in order to exclude others. A theoretical analysis reveals that the EMP does not affect winning bids but changes the Nash equilibria of the standard FPA that does not have any minimum prices. A laboratory analysis reveals that the winning bids of this new auction institution (i) are close to the production cost and coincide with those of the standard FPA under the identical cost condition and (ii) are higher than the lowest production cost and those of the standard FPA under our different cost condition when subjects’ identifications and bids are revealed
Variety expansion and fertility rates
Get PDF* Revised: Variety expansion and fertility rate [07-29-Rev., 2008]* Revised: [07-29-Rev3, 2010]To investigate how fertility rates interrelate with the modern economy,we construct a simple model in which variety expansion of consumptiongoods reduces fertility rates. In our model, variety expansion reduces therelative price of a composite of di¤erentiated goods compared to child-rearing costs. Thus, parents raise the expenditure share for di¤erentiatedgoods and lower the number of children. We show that this model canbe applied to a growth model in which economic growth progresses withvariety expansion of consumption goods and fertility rates decrease witheconomic growth. Thus, we show a new mechanism for fertility decline,and this mechanism can be applied to a growth model
