This paper extends the standard Diamond's two-period OLG model of capital accumulation by introducing labor-leisure choice into the first-period of agents' life. Under the assumption of gross substitutability, we show that multiple intertemporal equilibria require both highly complementary...

We analyze the sustainability of intergenerational transfers in politico-economic equilibrium. We argue that these transfers naturally arise in a Markov perfect equilibrium in the fundamental state variables. In contrast to earlier literature, our explanation does not resort to altruism,...

The German Income Tax Reform 2000, which announced a reduction in income tax rates to be implemented in a series of three stages, was welcomed by the public as a step towards unleashing lurking growth potentials. Nonetheless, in the course of the year 2001 a dispute arose, centering around the...