Inequality, trust and growth: An experimental study

In a three player dynamic public goods experiment, social output today determines production possibilities tomorrow.In each period, players choose to sabotage, to co-operate, or to play best response.Sabotage harms social output and growth.Mutual co-operation maximises both.The property rights to social output are distributed unequally.Extent and skew of inequality are varied. Empirical studies indicate a negative impact of inequality on trust and growth. We observe equilibrium play in most cases.There is also substantial co-operation, but little sabotage.Our exogenous variations of inequality are neutral to growth, neither negatively correlated to co-operation, nor positively correlated to sabotage.public goods;game theory

Centralized and decentralized decision making on social insurance in an integrated market (Revised version)

Social Security;Labour Migration

Fiscal Policies and Endogenous Growth in Integrated Capital Markets

This paper examines the effects of policy coordination in a two-country world with endogenous growth and imperfect capital mobility.Public investment and a public consumption good are financed by a source-based capital-income tax. By comparing the cases in which countries do and do not coordinate their fiscal policies, it follows that spending on investment and redistribution can be inefficiently high if fiscal policies are not coordinated.This is caused by the negative effects of fiscal policy on economic growth abroad.This externality can dominate the well-known tax-base externality.Coordination of only investment policy decreases the inefficiency of that policy, but it increases the inefficiency of noncoordinated provision of the public good.fiscal policy;economic growth;capital markets;economic integration;capital movements

Decision-making on pension schemes: Expectation-formation under demographic change

Pension Schemes;social security

Capital Mobility and Social Insurance in an Integrated Market

Social Security;Labour Market;Capital Movements;Economic Integration

HIV/AIDS Contamination Risk, Savings and the Welfare Effects of Diagnostic Testing

This paper models the effect of a HIV/AIDS epidemic on saving behavior and studies the welfare effects of testing for HIV. The model specifies a utility function that includes both regular consumption, and medical expenditures. Medical expenditures generate more utility if individuals are HIV infected, but they are only able to purchase the optimal medical consumption after being tested HIV positive. The paper describes different effects on aggregate savings according to different stages of the epidemic. We show that the HIV epidemic decreases savings if especially young individuals are (perceived to be) affected by the virus, but may increase savings if individuals perceive a sizable probability of getting infected later in life. By the same token, the welfare effects of testing young individuals differs greatly from the welfare effects of testing older individuals, the reason being that the savings responses to testing differ according to whether old or young individuals are tested.saving behavior;perceived risk;HIV/AIDS;HIV testing;mortality;life-cycle model

Self-Serving Dictators and Economic Growth

A new line of theoretical and empirical literature emphasizes the pivotal role of fair institutions for growth.We present a model, a laboratory experiment, and a simple cross-country regression supporting this view.We model an economy with an unequal distribution of property rights, in which individuals can free-ride or cooperate.Experimentally we observe a dramatic drop in cooperation (and growth), when inequality is increased by a selfserving dictator.No such effect is observed when the inequality is increased by a fair procedure.Our regression analysis provides basic macroeconomic support for the adverse growth effect of the interaction between the degree and the genesis of inequality.We conclude that economies giving equal opportunities to all are not likely to suffer retarded growth due to inequality in the way economies with self-serving dictators will.economic growth;inequality;corruption;public goods

Beggar Thy Thrifty Neighbour: The International Spillover Effects of Pensions Under Population Ageing

This paper explores the international spillover effects of ageing through capital markets when countries have different pension systems.We use a two-country twoperiod overlapping-generations model, where the two countries only differ in their pension schemes.Two forms of population ageing are considered, namely an increase in longevity and a fall in fertility.It is shown that in the long run a country using a funded pension system experiences negative spillovers from the fact that the other country uses a PAYG system.The short-run spillovers, however, are opposite to the spillovers in the long run.ageing;pensions;spillovers