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This study develops a general equilibrium life-cycle model to explore the welfare and inequality implications of different ways to return carbon tax revenue back to households. We find that the welfare-maximizing rebate uses two-thirds of carbon-tax revenue to reduce the distortionary tax on capital income while using the remaining one-third to increase the progressivity of the labor income tax. This recycling approach attains higher welfare and more equality than the lump-sum rebate approach preferred by policymakers as well as the approach originally prescribed by economists—which called exclusively for reductions in distortionary taxes. [ABSTRACT FROM AUTHOR]

Poverty measurement using durable ownership data is an attempt to infer income constraints by observing consumption choices. But what drives household spending choices on durable goods? How do these choices relate to poverty and class? What does it mean to be 'relatively' poor and why should we care to measure it? In this paper, we propose an economic theory of household decision-making that links these questions using a novel wealth-begets-wealth mechanism. We show that the steady state distribution of total (accumulated) household durable expenditures in this model exhibits natural clusters (classes). Furthermore, certain households may be vulnerable to a long run 'poverty of opportunities', being unable to access any of the channels of income generation available in society. Our model shows that relative poverty can be understood as the endogenous outcome of an intergenerational process that perpetuates unequal access to opportunities. This finding has novel implications for the measurement of poverty, which has traditionally hinged on definitions that assume exogenous (often arbitrary) cutoffs. The contribution of this paper also lies in its novel methodology, viz., formulating a theoretical model as the foundation of a data-generating process for synthetic observations, using patterns observed therein to inform the process of poverty measurement. The methodology delivers a framework for generating testable hypotheses around the long-run effect of policy changes (such as income transfers or education subsidies) on relative poverty – an approach that can be applied generally to understand the observed behaviour of economic agents in complex dynamic settings. [ABSTRACT FROM AUTHOR]

I examine global dynamics in a monetary model with overlapping generations of finite‐horizon agents, nonseparable preferences over consumption and real money balances, and a binding lower bound on nominal interest rates. Debt targeting rules exacerbate the possibility of self‐fulfilling liquidity traps, for agents expect austerity following deflationary slumps. Conversely, activist but sustainable fiscal policy regimes—implementing intertemporally balanced tax cuts and/or transfer increases in response to disinflationary trajectories—are capable of escaping liquidity traps and embarking inflation into a globally stable path that converges to the target. Should fiscal stimulus of last resort be overly aggressive, however, spiral dynamics around the liquidity‐trap steady state exist, causing global indeterminacy. [ABSTRACT FROM AUTHOR]

We investigate how a positive relation between inflation and capital investment (the Mundell–Tobin effect, MT‐E) affects optimal monetary policy in a framework that combines overlapping generations and new Monetarist models. We find that inflation rates above the Friedman rule are optimal if and only if there is an MT‐E. In the absence of the MT‐E, the Friedman rule is optimal. With an MT‐E, increasing inflation above the Friedman rule leads to a first‐order welfare gain from increasing capital investment, and only to a second‐order welfare loss from reducing consumption in markets where liquidity matters. [ABSTRACT FROM AUTHOR]

This paper develops a general equilibrium life-cycle model with endogenous retirement that focuses on the interplay between old-age pensions (OAP) and disability pensions (DP) in Germany. Germany has introduced a phased-in increase of the normal retirement age from age 65 to 67 (Reform 2007) and closed off other routes to early OAP retirement. This reform was followed by a phased-in expansion of future DP benefits (Reform 2018). Our simulation results indicate that the first reform will induce a shift toward DP retirement, while the Reform 2018 will even neutralize the financial and economic gains of the Reform 2007 if current DP eligibility and benefit rules remain unchanged. We therefore highlight the increased relevance of DP when reforming the retirement system and retirement incentives in an aging society. Securing the financial stability of public pensions requires activation and rehabilitation of sick elderly in the workforce and tight access to disability benefits. [ABSTRACT FROM AUTHOR]

Homeownership rates differ widely across European countries. We document that part of this variation is driven by differences in the fraction of adults co-residing with their parents. Comparing Germany and Italy, we show that in contrast to homeownership rates per household, homeownership rates per individual are very similar during the first part of the life cycle. To understand these patterns, we build an overlapping-generations model where individuals face uninsurable income risk and make consumption-saving and housing tenure decisions. We embed an explicit intergenerational link between children and parents to capture the three-way trade-off between owning, renting, and co-residing. Calibrating the model to Germany we explore the role of income profiles, housing policies, and the taste for independence and show that a combination of these factors goes a long way in explaining the differential life-cycle patterns of living arrangements between the two countries. [ABSTRACT FROM AUTHOR]

This paper develops an overlapping generations model that links a public health system to a pay-as-you-go (PAYG) pension system. It relies on two assumptions. First, the health system directly finances curative health spending on the elderly. Second, public pensions partially depend on health status by introducing a component indexed to society’s average level of old-age disability. Reducing the average disability rate in the economy then lowers pension benefits as the need to finance long-term care services also drops. We study the effects of introducing such a ‘comprehensive’ Social Security system on individual decisions, capital accumulation, and welfare. We first show that health investments can boost savings and capital accumulation under certain conditions. Second, if individuals are sufficiently concerned with their health when old, it is optimal to introduce a health-dependent pension system, as this will raise social welfare compared to a system where pensions are not tied to the society’s average level of old-age disability. Our analysis thus highlights an important policy recommendation: making PAYG pension schemes partially health-dependent can be beneficial to society. [ABSTRACT FROM AUTHOR]

Which is better for a firm, job rotation or specialization, can be considered as an endogenously formed worker-indivisible job matching problem. We model this problem as a firm's profit maximization problem under uncertainty, with and without overlapping generations. In both models, we show that among all possible job allocations, the rotation and specialization schemes are the only variations that can be optimal in terms of profits. Moreover, the rotation scheme is better when the productivity difference between post- and under-training workers is smaller, the uncertainty about job continuation in the future is more significant, or the slope of seniority wages is larger. The results indicate that firms in different environments prefer different worker-job matchings. [ABSTRACT FROM AUTHOR]

An extensive climate policy literature provides various recommendations for mitigating climate change, but these recommendations are not supported democratically, since the models employed consider either infinitely-lived individuals or normative social objectives (or both). In contrast, the present paper provides policy recommendations capable of incorporating democratic processes. I develop an overlapping generation model with political process micro-foundations and show how democratic climate policies are interconnected with other democratic policies. Time inconsistent social objectives combined with commitment issues lead to an inefficient tax on capital accumulation and a climate policy below the efficient level; while suppressing the tax on capital accumulation generates a climate policy even further below the efficient level. I derive a novel politico-economic Keynes–Ramsey rule for the market interest rate, which is useful for calculating the climate policy level. I show that individual pure time preference, individual altruism toward descendants, and young generation political power are key determinants of democratic climate policy ambition. [ABSTRACT FROM AUTHOR]

As the heterogeneity in life expectancy by socioeconomic status increases, many pension systems imply a wealth transfer from short- to long-lived individuals. Various pension reforms aim to reduce inequalities that are caused by ex-ante differences in life expectancy. However, these pension reforms may induce redistribution effects. We introduce a dynamic general equilibrium-overlapping generations model with heterogeneous individuals that differ in their education, labor supply, lifetime income, and life expectancy. Within this framework we study six different pension reforms that foster the sustainability of the pension system and aim to account for heterogeneous life expectancy. Our results highlight that pension reforms have to be evaluated at various dimensions. Reforms that may increase the sustainability of the pension system are not necessarily conducive to reduce the redistributive wealth transfers from short- to long-lived individuals. Our paper emphasizes the need for studying pension reforms in models with behavioral feedback and heterogeneous socioeconomic groups. [ABSTRACT FROM AUTHOR]

The sustainability of resource use and the management of public finances are both long‐run issues that are linked to each other through savings decisions. To study them conjointly, this paper introduces a public debt stabilization constraint in an overlapping generation model in which nonrenewable resources constitute a necessary input in the production function and belong to agents. It shows that stabilization of public debt at a high level (as share of capital) may prevent the existence of a sustainable development path, that is, a path on which per capita consumption is not decreasing. Public debt thus appears as a threat to sustainable development. It also shows that higher public debt‐to‐capital ratios (and public expenditures‐to‐capital ones) are associated with lower growth. Two transmission channels are identified. As usual, public debt crowds out capital accumulation. In addition, public debt tends to increase resource use which reduces the rate of growth. We also provide a numerical analysis of the dynamics that shows that the economy is characterized by saddle path stability. Finally, we show that the public debt‐to‐capital ratio may be calibrated to implement the social planner optimal allocation according to which the growth rate is increasing in the degree of patience. [ABSTRACT FROM AUTHOR]

This paper reconsiders the question of testing for the presence of Pareto suboptimal capital overaccumulation in overlapping generations economies. The paper allows generation‐specific technology shocks to evolve over time according to a stationary Markov chain, and assumes that an econometrician observes a finite sample of aggregate quantities. In this setting, any statistical test of the null hypothesis of capital overaccumulation with size less than one also has zero power against the alternative hypothesis of a dynamically efficient steady state. This result means that the standard assessments of capital overaccumulation based on US aggregate quantity data should be viewed as inconclusive. [ABSTRACT FROM AUTHOR]

The article compares different versions of individual-based models of single population dynamics with overlapping generations with results of the model of population with non-overlapping generations. In all models, various versions of global competition for common resources and their unequal partitioning between competing individuals are analysed, i.e., when juveniles and adult individuals compete for the same resources, when juveniles and adult individuals use different resources, and a case called mother’s care. The article analyses the relationship between individual variability and population persistence measured by the time of population extinction. Persistence of a population is increased by all forms of competition between individuals not weakened by any environmental factors (e.g. diversification of resources of competing individuals) or factors arising from evolutionary history of the species (e.g. mother’s care) and related in an appropriate way to the mechanism shaping individual variability in the population. Any form of weakening competition leading to decreasing individual variability will adversely affect the persistence of the population. However, differences between versions of the model are not very big.

In this paper, I consider two normative questions: (1) how should policymakers approach tradeoffs that involve different age groups, and (2) at what rate should policymakers discount the consumption of future generations? I demonstrate that, under standard assumptions, these two questions are equivalent: caring more about the future means caring less about the elderly. Even small differences between the social discount rate and the market interest rate can have significant quantitative implications for the relative value placed on the consumption of different age groups. [ABSTRACT FROM AUTHOR]

For theoretical studies, reaction norm evolution in a changing environment can be modeled by means of the multivariate breeder's equation, with the reaction norm parameters treated as traits in their own right. This is, however, not a feasible approach for the use of field data, where the intercept and slope values are not available. An alternative approach is to use infinite‐dimensional characters and smooth covariance function estimates found by, e.g., random regression. This is difficult because of the need to find, for example, polynomial basis functions that fit the data reasonably well over time, and because reaction norms in multivariate cases are correlated, such that they cannot be modeled independently. Here, I present an alternative approach based on a multivariate linear mixed model of any order, with dynamical incidence and residual covariance matrices that reflect the changing environment. From such a mixed model follows a dynamical BLUP model for the estimation of the individual reaction norm parameter values at any given parent generation, and for updating of the mean reaction norm parameter values from generation to generation by means of Robertson's secondary theorem of natural selection. This will, for example, make it possible to disentangle the microevolutionary and plasticity components in climate change responses. The BLUP model incorporates the additive genetic relationship matrix in the usual way, and overlapping generations can easily be accommodated. Additive genetic and environmental model parameters are assumed to be known and constant, but it is discussed how they can be estimated by means of a prediction error method. The identifiability by the use of field or laboratory data containing environmental, phenotypic, fitness, and additive genetic relationship data is an important feature of the proposed model. [ABSTRACT FROM AUTHOR]

This paper evaluates alternative reforms of the public pension system in an overlapping generations model for an open economy facing demographic change. We make progress compared to existing literature on pension reform by modelling individuals with heterogeneous innate ability and endogenous human capital, and by putting (the reduction of) welfare inequality effects of reform at the centre. Frequently adopted reforms such as an increase of the normal retirement age or a decrease of the pension benefit can guarantee financial sustainability, but they fail when the objective is also to avoid intergenerational or intragenerational welfare inequality. Our results prefer a reform which combines an increase of the retirement age with an intelligent linkage between the pension benefit and earlier labour earnings. First, this design conditions pension benefits on past individual labour income, with a high weight on labour income earned when older and a low weight on labour income earned when young. Second, this linkage is complemented by a strong rise in the benefit replacement rate for low ability individuals (and a reduction for high ability individuals). [ABSTRACT FROM AUTHOR]

This paper shows that, when parents can endow their offspring with bequests and human capital, markets cannot deliver (generically under laissez-faire) the planner's choice, if educational investments affect total factor productivity—as empirical evidence establishes. Moreover, for a human capital production function close enough to affine (around market and planner steady states with similar fertilities), the market steady state wage is higher than the marginal productivity of labor at the planner's steady state, so that the market steady state human capital is too low. In other words, the market misses the planner's allocation by leading households to transfer to their offspring more in bequests and less in education than would be optimal. These results obtain in spite of parents perfectly internalising (1) the value for their children of their bequests and educational investment, but not (2) the externality on total factor productivity—nor hence on factor prices. The planner's allocation can, nonetheless, be decentralised subsidising labor income through a lump-sum tax on saving returns that reduces bequests. An estimate of the subsidy needed—for standard functional forms and parameter values estimated from US data—suggests a sizeable market inefficiency. [ABSTRACT FROM AUTHOR]

Abstract For theoretical studies, reaction norm evolution in a changing environment can be modeled by means of the multivariate breeder's equation, with the reaction norm parameters treated as traits in their own right. This is, however, not a feasible approach for the use of field data, where the intercept and slope values are not available. An alternative approach is to use infinite‐dimensional characters and smooth covariance function estimates found by, e.g., random regression. This is difficult because of the need to find, for example, polynomial basis functions that fit the data reasonably well over time, and because reaction norms in multivariate cases are correlated, such that they cannot be modeled independently. Here, I present an alternative approach based on a multivariate linear mixed model of any order, with dynamical incidence and residual covariance matrices that reflect the changing environment. From such a mixed model follows a dynamical BLUP model for the estimation of the individual reaction norm parameter values at any given parent generation, and for updating of the mean reaction norm parameter values from generation to generation by means of Robertson's secondary theorem of natural selection. This will, for example, make it possible to disentangle the microevolutionary and plasticity components in climate change responses. The BLUP model incorporates the additive genetic relationship matrix in the usual way, and overlapping generations can easily be accommodated. Additive genetic and environmental model parameters are assumed to be known and constant, but it is discussed how they can be estimated by means of a prediction error method. The identifiability by the use of field or laboratory data containing environmental, phenotypic, fitness, and additive genetic relationship data is an important feature of the proposed model.

First generation immigrants to the United States have higher fertility rates than natives. This paper analyzes to what extent this factor provides political support for immigration, using an overlapping generation model with production and capital accumulation. In this setting, immigration represents a dynamic trade-off for native workers as more immigrants decrease current wages but increase the future return on their savings. We find that immigrant fertility has surprisingly strong effects on voter incentives, especially when there is persistence in the political process. If fertility rates are sufficiently high, native workers support immigration. Persistence, either due to inertia induced by frictions in the legal system or through expectational linkages, significantly magnifies the effects. Entry of immigrants with high fertility has redistributive impacts across generations similar to pay-as-you-go social security: initial generations are net winners, whereas later generations are net losers.

We analyze the effects of a debt relief, that is, a decrease in public debt of a low‐income country financed by a high‐income country, on environmental quality. Under perfect mobility of assets, the debt relief increases the overall capital stock, and environmental quality when public abatements are sufficiently efficient. Welfare in both countries can also improve. Under a weak mobility of assets, capital does no more increase in the richest country, but environmental quality can improve. This comes from a crowding‐out effect of debt in the high‐income country, which does no more take place when the mobility of assets is significant. [ABSTRACT FROM AUTHOR]

This study analyzes the impact of aging — an increase in longevity or a decrease in fertility rates — on pension benefits in an economy that incorporates automation capital in the production process. Across all three pension schemes—pay as you go, fully funded, and modified fully funded, we observe that the impact of increasing longevity is more pronounced than that of a decreasing fertility rate. Specifically, our analyses indicate that while increasing longevity consistently has a negative impact on pension benefits under all pension schemes, the impact of a decreasing fertility rate varies according to the pension scheme. Additionally, based on the common observation across all pension schemes that low-skilled households are vulnerable to the impacts of aging, we explore redistributive policies to improve the welfare of these households, and our findings indicate that the policy that leads to Pareto improvement can vary depending on the main driver of demographic transitions. [ABSTRACT FROM AUTHOR]

This article discusses the interactions among pension reform, labor market and inter-generational distribution issues through an overlapping general equilibrium approach with imperfect labor markets. Workers with different ages are imperfectly substitutable and wages do not clear labor markets. Increasing contribution rates has a strong negative effect on welfare and unemployment, particularly, for the youth. Contrary to the popular wisdom, postponing the retirement age does not entail an increase in youth unemployment. The change in incentives induces a substitution of old-age workers by young workers who constitute the cheapest labor category. However, this scenario substantially increases the implicit tax for older workers as well as for the youngest. Finally, the middle-aged are those that benefit the most from welfare increasing reforms. [ABSTRACT FROM AUTHOR]

We consider an overlapping generations economy with altruism toward parents and a long‐lived asset that delivers no dividends (pure bubble asset). We explore the role of ascendant altruism on the dynamic properties of equilibrium and rational bubbles in the cases of exogenous and endogenous growth. [ABSTRACT FROM AUTHOR]

In a standard overlapping generations model, we show how the health effects of pollution impact the balanced-growth path (BGP) and the transition dynamics of the economy. The key driver is the differential between physical and human capital accumulation. The differential occurs because pollution alters the incentives to save and to invest in education via reductions in longevity and alters the effectiveness of education expenditures via impaired cognitive learning. Two predictions of the model are noteworthy. The first prediction is the existence of two stable BGPs with a separating saddle path. One BGP is desirable featuring high economic growth and low pollution, whereas the other should be avoided because it is associated with low economic growth and high pollution. The second prediction is that economic and environmental cycles may emerge, implying inequality between generations. These theoretical results are supported by empirical evidence and imply a role for government to steer the economy toward the desirable BGP and eliminate the cycles. [ABSTRACT FROM AUTHOR]

Trade changes incentives to protect an open-access natural resource independently of its effect on the resource price. General equilibrium linkages cause resource policy to affect the price of privately owned assets regardless of whether they are used in the resource sector. In the closed economy, the asset market in our overlapping generations setting creates incentives for currently living agents to protect the natural resource. The interplay of the asset market and general equilibrium effects causes trade to reverse these incentives. Trade liberalization and the establishment of formal property rights are policy complements: the former makes the latter more important. [ABSTRACT FROM AUTHOR]

We examine the implications of limited stock market participation (the stylized fact that only a fraction of households directly own stocks) for economic growth and, in particular, fiscal sustainability. Constructing an overlapping generations model where (1) individuals can choose between two types of savings (i.e., physical capital with high returns but costly to hold and bank deposits with low returns but no costs), and (2) banks invest part of their total deposits in physical capital and use the rest to underwrite government debt, we show the following. First, an increase in the average level of an individual's financial literacy worsens fiscal sustainability while promoting economic growth under plausible parameter values. Second, if banks decrease (resp. increase) the number of government bonds they underwrite, fiscal sustainability improves (resp. worsens) when the average financial literacy of individuals is relatively low. [ABSTRACT FROM AUTHOR]

1. The Wright-Fisher model, which directs how matings occur and how genes are transmitted across generations, has long been a lynchpin of evolutionary biology. This model is elegantly simple, analytically tractable and easy to implement, but it has one serious limitation: essentially no real species satisfies its many assumptions. With growing awareness of the importance of jointly considering both ecology and evolution in eco-evolutionary models, this limitation has become more apparent, causing many researchers to search for more realistic simulation models. 2. A recently described variation retains most of the Wright-Fisher simplicity but provides greater flexibility to accommodate departures from model assumptions. This generalized Wright-Fisher model relaxes the assumption that all individuals have identical expected reproductive success by introducing a vector of parental weights w that specifies relative probabilities different individuals have of producing offspring. With parental weights specified this way, expectations of key demographic parameters are simple functions of w. This allows researchers to quantitatively predict the consequences of non-Wright- Fisher features incorporated into their models. 3. An important limitation of the Wright-Fisher model is that it assumes discrete generations, whereas most real species are age structured. Here I show how an algorithm (TheWeight) that implements the generalized Wright-Fisher model can be used to model evolution in age-structured populations with overlapping generations. Worked examples illustrate simulation of seasonal and lifetime reproductive success and show how the user can pick vectors of weights expected to produce a desired level of reproductive skew or a desired Ne/N ratio. Alternatively, weights can be associated with heritable traits to provide a simple, quantitative way to model natural selection. Using TheWeight, it is easy to generate positive or negative correlations of individual reproductive success over time, thus allowing explicit modelling of common biological processes like skip breeding and persistent individual differences. 4. Code is provided to implement basic features of TheWeight and applications described here, including one scenario implemented in SLiM. However, required coding changes to the Wright-Fisher model are modest, so the real value of the new algorithm is to encourage users to adopt its features into their own or others' models. [ABSTRACT FROM AUTHOR]

To explore how speculative trading influences prices in financial markets, we conduct a laboratory market experiment with speculating investors (who do not collect dividends and trade only for capital gains) and dividend-collecting investors. Moreover, we operate markets at two different levels of money supply. We find that in phases with only speculating investors present (i) price deviations from fundamentals are larger; (ii) prices are more volatile; (iii) mispricing increases with the number of transfers until maturity; and (iv) speculative trading pushes prices upward (downward) when the supply of money is high (low). These results suggest that controlling the money supply can help to stabilize asset prices. [ABSTRACT FROM AUTHOR]

Currently living people might reduce carbon emissions to protect themselves, their wealth, or future generations from climate damage. An overlapping generations climate model with endogenous asset priceand investment levels disentangles these incentives. Asset markets capitalize the future e¤ects of policy, regardless of people�s concern for future generations. These markets can lead self-interested agents to undertake signi�cant abatement. A small climate policy that raises the price of capital increases welfare of old agents and also increases welfare of young agents with a high intertemporal elasticity of sub-stitution. Climate policy can also have subtle distributional e¤ects across the currently living generations.

For simplicity or realism, determinacy analysis for overlapping-generations models typically aggregates all conceivable commodities into a fixed, finite number of types. Analysis finds robust examples with indeterminate equilibria, which suggests indeterminacy may be significant among overlapping generations. But does robust indeterminacy exist despite that simplifying aggregation? or because of aggregation? We suggest the latter with a generic determinacy theorem for overlapping-generations models with idealized competitive markets for a continuum of commodities in discrete or continuous time. And aggregating the continuum of commodities into a finite number of types transforms some of those generic, determinate models into ostensibly-robust indeterminacy examples. [ABSTRACT FROM AUTHOR]

The aim of this paper is to study the role of the distribution of income by age group on the existence of speculative bubbles. A crucial question is whether this distribution may promote a bubble associated to a larger level of capital, that is a productive bubble. We address these issues in an overlapping generations model where agents live three periods and productive investment done in the first period of life is an illiquid investment whose return occurs in the following two periods. A bubble is a liquid speculative investment that facilitates intertemporal consumption smoothing. We show that the distribution of income by age group determines both the existence and the effect of bubbles on aggregate production. We also show that fiscal policy, by changing the distribution of income, may facilitate or prevent the existence of bubbles and may also modify the effect that bubbles have on aggregate production. [ABSTRACT FROM AUTHOR]

In recent years, it is of great interest to evaluate the level of liabilities of the hybrid pension system as the mixed pension schemes are favored by various countries around the world. This paper further improves the hybrid pension liability assessment method proposed by Broeders et al by accounting for inflation risk and assuming that inflation risk is measured by a price index that follows geometric Brownian motion. A simulation-based pricing framework is then introduced to assess the hybrid pension liability. The results show that the introduction of inflation risk increases the total outstanding liability of hybrid pensions. Furthermore, inflation is negatively correlated with the total outstanding liability of the hybrid pension scheme, while inflation volatility is positively correlated with it. [ABSTRACT FROM AUTHOR]

Outward habit formation affects consumption decisions. Since consumption displays a negative environmental externality, outward habits has as well an (adverse) effect on the environment. This research paper centers around the theoretical linkage between the combination of both externalities (environmental deterioration and outward habits). The objective of this study is to examine the impacts of outward habits on the state of the environment in the context of an overlapping generations economy. In our study, environmental quality is a public good negatively affected by consumption activity and positively affected by maintenance investment. With outward habit formation, the build-up level of average past consumption in the economy at large influences the current utility of an individual consumer. Thus, individuals draw utility not only from their own level of current consumption, but also from its level relative to the average consumption in the economy. How does outward habit influence the state of the environment? We analyze this question using an overlapping generations model with outward habit and environmental quality in the utility function. In steady state equilibrium allocation, we show that whether outward habits are destructive to the environment depends on the degrees of outward habit formation and the size of the economy.

The present paper presents a standard overlapping generations model with external habits formation and environmental quality in the utility function. Our main objective is to study the impact of external habits on capital accumulation and environmental quality on the intertemporal competitive equilibrium. We notice that striving for status leads to environment worsening and capital increasing when the cohort size is large.

This paper presents a prospective analysis to guide effective pension reform. Using an overlapping generations model with differing returns on free savings and compulsory returns on funded pensions, we put into perspective the results largely supported in the economic literature that assume that replacing a pay-as-you-go pension scheme by funded plans boosts economic growth. We show that this reform is not necessarily synonymous with economic growth due to a crowding-out effect. Our contribution is not limited to theoretical results: we also assess the impacts empirically. Thus, we extend the theoretical model to take into account several periods and 55 generations. Simulation results, using a dynamic overlapping generations computable general equilibrium model calibrated for the Tunisian case, indicate that whether pension reform promotes capital accumulation and economic growth depends on the rate of return on funded pension savings relative to free savings.

We explore the effect of fixed versus dynamic group membership on public good provision. In a novel experimental design, we modify the traditional voluntary contribution mechanism (VCM) by periodically replacing old members of a group with new members over time. Under this dynamic, overlapping generations matching protocol we find that average contributions experience significantly less decay over time relative to a traditional VCM environment with fixed group membership and a common termination date. These findings suggest that the traditional pattern of contribution and decay seen in many public goods experiments may not accurately reflect behavior in groups with changing membership, as is the case in many real-world environments.