The Dynamics of Inequality and Social Security in General Equilibrium

This paper analyzes the dynamic politico-economic equilibrium of a model where repeated voting on social security and the evolution of household characteristics in general equilibrium are mutually affected over time. In particular, we incorporate within-cohort heterogeneity in a two-period Overlapping-Generation model to capture the intra-generational redistributive effect of social security transfers. Political decision-making is represented by a probabilistic voting à la Lindbeck and Weibull (1987). We analytically characterize the Markov perfect equilibrium, in which social security tax rates are shown to be increasing in wealth inequality. The dynamic interaction between inequality and social security leads to growing social security programs. We also perform some normative analysis, showing that the politico-economic equilibrium outcomes are fundamentally different from the Ramsey allocation.

On Explicit Probability Densities Associated with Fuss-Catalan Numbers

In this note we give explicitly a family of probability densities, the moments of which are Fuss-Catalan numbers. The densities appear naturally in random matrices, free probability and other contexts.Comment: 4 page

PRESS: A Novel Framework of Trajectory Compression in Road Networks

Location data becomes more and more important. In this paper, we focus on the trajectory data, and propose a new framework, namely PRESS (Paralleled Road-Network-Based Trajectory Compression), to effectively compress trajectory data under road network constraints. Different from existing work, PRESS proposes a novel representation for trajectories to separate the spatial representation of a trajectory from the temporal representation, and proposes a Hybrid Spatial Compression (HSC) algorithm and error Bounded Temporal Compression (BTC) algorithm to compress the spatial and temporal information of trajectories respectively. PRESS also supports common spatial-temporal queries without fully decompressing the data. Through an extensive experimental study on real trajectory dataset, PRESS significantly outperforms existing approaches in terms of saving storage cost of trajectory data with bounded errors.Comment: 27 pages, 17 figure

Financial Friction, Capital Reallocation and Expectation-Driven Business Cycles

In this paper, we show that news on future technological improvement can trigger an immediate economic expansion in a model with financial friction on capital allocation. The arrivial of good news on future technology reduces such frictions and generates significant increase in current Total Factor Productivity via capital reallocation. This triggers an immediate boom in output, consumption, investment and hours worked. Our empirical evidence using firm-level data supports strongly the above mechanisms for news to affect current aggregate productivity.Financial Friction; Capital Reallocation; Business Cycle

Financial Frictions on Capital Allocation: A Transmission Mechanism of TFP Fluctuations

This paper provides a theory of financial frictions as a transmission mechanism for primitive shocks to translate into aggregate TFP fluctuations. In our model, financial frictions distort existing capital allocation across different production units, rather than investment in new capital. News shocks on future technology improvement are introduced as a device to identify TFP fluctuations originating from this mechanism. Our simulation shows that variations in financial frictions in response to news shocks can generate sizable fluctuations in aggregate TFP and, thus, business cycles before the actual technology change is realized. Using a combined dataset from Compustat and IBES, we find that the empirical responses of capital acquisition to prospects about future profitability are significantly larger for firms more likely to be financially constrained, while such a pattern does not exist for new capital investment. Furthermore, capital acquisition of constrained firms is found to be more procyclical than that for unconstrained ones. Our evidence thus provides strong support for the importance of financial frictions on capital allocation as the transmission mechanism proposed by our theory.Financial Friction, Capital Reallocation, TFP Fluctuation, News Shock