This paper evaluates the macroeconomic and distributional effects of government bailout guarantees for Government Sponsored Enterprises (such as Fannie Mae and Freddy Mac) in the mortgage market. In order to do so we construct a model with heterogeneous, infinitely lived households and...

We then explore whether a simple partial equilibrium Friedman-style permanent income model is consistent with the empirical facts. Our preliminary findings suggest that the PIH model provides a reasonably good approximation of the facts in the data, but only if transitory income shocks are the...

and income risk.

n this paper we first use the Italian Survey of Household Income and Wealth to document how various household choices (including consumption and wealth) change in response to an income change. We show that these responses are not consistent with simple benchmark models (i.e. complete markets or...

In this paper we argue that a capital income tax is an effective tool for redistribution and insurance even when progressive labor income taxes are available to the policy maker. To make this point we construct a large scale Overlapping Generations Model with uninsurable income risk, show that...

In this paper we argue that very high marginal labor income tax rates are an effective tool for social insurance even when households have preferences with high labor supply elasticity, make dynamic savings decisions, and policies have general equilibrium effects. To make this point we construct...

We propose a new classification of consumption goods into nondurable goods, durable goods and a new class which we call memorable goods. A good is memorable if a consumer can draw current utility from its past consumption experience through memory. We propose a novel consumption-savings model in...

This paper constructs a dynamic model of health insurance to evaluate the short- and long run effects of policies that prevent firms from conditioning wages on health conditions of their workers, and that prevent health insurance companies from charging individuals with adverse health conditions...

How much additional tax revenue can the government generate by increasing labor income taxes? In this paper we provide a quantitative answer to this question, and study the importance of the progressivity of the tax schedule for the ability of the government to generate tax revenues. We develop...

In this paper we characterize quantitatively the optimal mix of progressive income taxes and education subsidies in a model with endogenous human capital formation, borrowing constraints, income risk and incomplete fi…nancial markets. Progressive labor income taxes provide social insurance...