A Life-Cycle Overlapping-Generations Model of the Small Open Economy

In this paper we construct an overlapping generations model for the small open economy incorporating a realistic description of the mortality process. With agedependent mortality, the typical life-cycle pattern of consumption and saving results from the maximizing behaviour of individual households. Our ?Blanchard-Yaari-Modigliani?model is used to analytically study a number of typical shocks affecting the small open economy, namely a balanced-budget public spending shock, a temporary Ricardian tax cut, and an interest rate shock. The demographic details matter a lot?both the impulse-response functions and the welfare profiles (associated with the different shocks) are critically affected by them. These demographic details furthermore do not wash out in the aggregate. The model is flexible and can be applied to a wide variety of theoretical and policy issues.

Integral cost-benefit analysis of Maglev technology under market imperfections

The aim of this article is to assess a proposed new mode of guided high speed ground transportation, the magnetic levitation rail system (Maglev), and to compare the results of a partial cost-benefit analysis with those of an integral CBA. We deal with an urbanconglomeration as well as a core-periphery Maglev project and also try to explain why the older German Maglev proposal to connect two large, but distant cities (Hamburg and Berlin) was rejected. The empirical outcomes of our study provide policy information on the interregional redistribution of working population and labor demand and whether these projects are worthwhile in terms of national welfare. They also show that the additional economic benefits due to market imperfections vary from –1% to +38% of the direct transport benefits, depending on the type of regions connected and the general condition of the economy. Hence, a uniform ‘additional to direct benefit’ ratio does not exist.

Intergenerational Risk Sharing, Pensions and Endogenous Labor Supply in General Equilibrium

In the context of a two-tier pension system, with a pay-as-you-go first tier and a fully funded second tier, we demonstrate that a system with a defined wage-indexed second tier performs strictly better than one with a defined contribution or defined real benefit second tier. The former completely separates systematic redistribution (confined to the first tier) from intergenerational risk sharing (the role of the second tier). This way labor supply is undistorted.funded pensions, risk sharing, overlapping generations, endogenous labour supply

Integral assessment of urban conglomeration versus centre-periphery maglev rail systems under market imperfections

New transport infrastructure has a myriad of short and long run effects. The effects on population and economic activity are most difficult to estimate. This paper introduces three different models to estimate the impacts of new infrastructure on labour supply and demand, and carefully explains how the interaction between the models and their outcomes should be handled. A commuter location model is developed to estimate the impact of enabling longer commuting ranges within the same commuting time on housing migration. A spatial general equilibrium model (RAEM) is developed to estimate the impacts of increased spatial competition on firms and spatial production choices. The commuter location model is then used again to estimate the residential choices of the subsequent labour migration. Finally, an interregional commuter expenditure multiplier matrix is constructed to estimate the employment effects of both housing and labour migration. The methodology developed is applied to four Transrapid (magnetic levitation rail) proposals, each following a different route within the Netherlands. The empirical outcomes show remarkable patterns of effects and differences in effects, which were not expected beforehand but be explained quite well. Thus important new insights into the spatial pattern of indirect effects of new infrastructure in general are provided.

Participation Constraints in Pension Systems

We explore voluntary participation in pension arrangements. Individuals only participate when participation is more attractive than autarky. The benefit of participation is that risks can be shared with future generations. We apply our analysis to a pay-as-you-go system, a funded system without buffers and a funded system with buffers. Buffers play a particularly interesting role, because they raise the sensitivity of the contributions to the asset returns. In particular, compared to a system without buffer requirements, they require higher contributions when asset returns are low. Moreover, individual contributions may be increasing or decreasing in the size of the young cohort, depending on whether the fund has more or less reserves than required. We confine ourselves to recursive settings and study equilibria characterised by thresholds on the contribution that young generations are prepared to make assuming that the future young apply the same threshold. For standard parameter settings two such equilibria exist, of which only the one with the higher threshold is consistent with the initial young being prepared to start the system. Finally, we explore the social welfare maximising policy parameter settings for various levels of uncertainty and risk aversion

Voluntary Participation and Intergenerational Risk Sharing in a Funded Pension System

We explore the feasibility of a funded pension system with intergenerational risk sharing when participation in the system is voluntary. Typically, the willingness of the young to participate depends on their belief about the future young's willingness to do so. We characterise equilibria with voluntary participation and show that the likelihood of their existence increases with risk aversion and financial market uncertainty. We find that mandatory participation is often necessary to sustain a funded pension pillar and to let participants benefit from intergenerational risk sharing

Voluntary participation and intergenerational risk sharing in a funded pension system

We explore the feasibility of a funded pension system with intergenerational risk sharing when participation in the system is voluntary. Typically, the willingness of the young to participate depends on their belief about the future young's willingness to do so. We characterise equilibria with voluntary participation and show that the likelihood of their existence increases with risk aversion and financial market uncertainty. We find that mandatory participation is often necessary to sustain a funded pension pillar and to let participants benefit from intergenerational risk sharing