This paper studies the effects of a fully funded social security reform with endogenous fertility in a detailed, general equilibrium life-cycle model with dynasties whose members differ in skills and life uncertainty. We find that as high skill households tend to save relatively more in assets...

We develop a new methodology for finding optimal government policies in economies with heterogeneous agents. The methodology is solely based on three classes of equilibrium conditions from the government's and individual agent's optimization problems: 1) the first order conditions; 2) the...

We calibrate the model to the U.S. economy in order to quantify these policies and evaluate their impact in the transition and in the steady state. We find that, when the optimal schooling policies are implemented jointly with the optimal income taxes then they are negligible and their effect is...

This paper studies the effects of a flat-tax reform in a dynamic, general equilibrium model with heterogeneous agents and occupational choice. Each agent has a choice to be a worker or to establish a firm and become an entrepreneur with a limited ability to borrow in financial markets. Because...

In this paper we develop a new general methodology for computing the optimal, welfare maximizing social planner's policies for economies with heterogeneous agents in which the stationary distribution of agents is a part of the optimization problem. Previous models analyzing the effects of...

This paper studies the effects of financial intermediation on aggregate levels and the distribution of resources in an economy with wealth-constrained heterogeneous agents and occupational choice. Whether an agent becomes an entrepreneur depends on a realized entrepreneurial ability and...

This paper describes a classroom experiment demnstrating the price mechanism and the clearing of the markets in an endowment economy. Participants receive random endowments of two goods they may trade in order to maximize a given utility function. A market-clearing price is reached when no...

In this paper we analyze productivity and welfare losses from capital misallocation in a general equilibrium model of occupational choice and endogenous financial intermediation. We study the effects of borrowing and lending, insurance, and risk sharing on the optimal allocation of resources. We...

This paper studies the effects of different levels of social insurance on efficiency and distribution of resources in a general equilibrium model of a closed economy with heterogeneous agents and moral hazard. I compare optimal allocations of capital, labor supply, and consumption in stationary...

In this paper we develop a general methodology for solving models with heterogeneous agents by projection methods. Our approach is solely based on the functional forms of agents’ optimal policy rules and on a functional condition on the endogenous stationary distribution. Solving...