This paper studies when and how intertemporal bundling arises in optimal dynamic selling mechanisms in a two-period setting, in which two objects are available for sale sequentially in different periods. When the buyer’s values of the two objects are independent, in contrast to conventional...

Hiring is a costly activity reflecting firms' investment in their workers. Microdata show that hiring costs involve production disruption. Thus, cyclical fluctuations in the value of output, induced by price frictions, have consequences for the optimal allocation of hiring activities. We outline...

Hiring is a costly activity reflecting firms' investment in their workers. Microdata show that hiring costs involve production disruption. Thus, cyclical fluctuations in the value of output, induced by price frictions, have consequences for the optimal allocation of hiring activities. We outline...

We propose a new method to test for efficient risk pooling that allows for intertemporal smoothing, non-homothetic consumption, and heterogeneous risk and time preferences. The method is composed of three steps. The first one allows for precautionary savings by the aggregate risk pooling group....

Climate modelers have recognized the possibility of abrupt climate changes caused by a reorganization of the North Atlantic's current pattern (technically known as a thermohaline circulation collapse). This circulation system now warms north-western Europe and transports carbon dioxide to the...

Recursive preferences have found widespread application in representative-agent asset-pricing models and general equilibrium. A majority of these applications exploit two decision-theoretic properties not shared by the standard model of intertemporal choice: (i) agents care about the...

Standard consumption utility is linked in time to a consumption event, whereas the timing of prosocial utility flows is ambiguous. Prosocial utility may depend on the actual utility consequences for others – it is consequence-dated – or it may be related to the act of giving and is thus...

I examine optimal taxes in an overlapping generations economy in which each consumer's utility depends on consumption relative to a weighted average of consumption by others (the benchmark level of consumption) as well as on the level of the consumer's own consumption. The socially optimal...

The lifecycle labor supply model has been proposed as an explanation for various dimensions of labor supply, including movements over the business cycle, changes with age, and within-person variation over time. According to the model, all of these elements are tied together by a combination of...

In a canonical intertemporal consumption problem, I show how anticipation of future consumption mistakes leads to higher current marginal propensities to consume (MPCs). This result is driven by mistakes in future consumption's response to saving changes (i.e., changes in asset balances) and is...

Prospect Theory is the most prominent contender of expected utility theory to describe decisions under risk. In atemporal contexts, prospect theory is well understood. In intertemporal contexts, however, it is not clear how prospect theory should be applied (in particular, whether probabilities...

We apply non-linear error-correction models to the empirical testing of the sustainability of the government’s intertemporal budget constraint. Our empirical analysis, based on Italy, shows that the Italian government is meeting its intertemporal budget constraint, in spite of the high levels...

Previous literature concludes that replacing wage taxation by taxes on a fixed factor or its rents benefits future generations. However, the effects of such steady-state gains on the transition generations have been left open. In this paper, we show that taxation of rents may also increase...

As an alternative to the conventional methods for measuring chronic poverty, this paper proposes an interpersonal comparable measure of permanent income as a basis for defining and measuring chronic poverty. This approach accounts for the fact that individuals regularly undertake inter-period...

This paper analyzes nature protection by a social planner under different "utilitarian" social welfare functions. For that purpose we construct an integrated model of the economy and the ecosystem with explicit consideration of nonhuman species and with competition between human and nonhuman...

Climate modelers have recognized the possibility of abrupt climate changes caused by a reorganization of the North Atlantic's current pattern (technically known as a thermohaline circulation collapse). This circulation system now warms north-western Europe and transports carbon dioxide to the...

The purpose of this paper is to extend the dynamic resource allocation problem by including stock externalities like accumulated CO2 and SO2 emissions as well as flow externalities like waste of energy or pollutants which can be abated (SO2). The objective is to examine how the evolution of...

We consider the Hartwick rule for capital accumulation and resource depletion, provide semantic clarifications and investigate whether this rule indicates sustainability and requires substitutability between manmade and natural capital. In addition to shedding light on the meaning of the...

Hiring is a costly activity reflecting firms' investment in their workers. Micro-data shows that hiring costs involve production disruption. Thus, cyclical fluctuations in the value of output, induced by price frictions, have consequences for the optimal allocation of hiring activities. We...

In this paper, we study intertemporal social welfare evaluations when agents' discount factors may be different. We first show that there exists a conflict between efficiency, equity, and time consistency, even if all agents share the same discount factor. We argue that this impossibility result...

This paper studies household labor supply, within the context of an intertemporal collective model, and three prominent intrahousehold commitment regimes: full commitment, no commitment, and limited commitment. We propose a test that distinguishes among all three alternatives based on how...

Hiring is a costly activity reflecting firms' investment in their workers. Micro-data shows that hiring costs involve production disruption. Thus, cyclical fluctuations in the value of output, induced by price frictions, have consequences for the optimal allocation of hiring activities. We...

This paper studies household labor supply, within the context of an intertemporal collective model, and three prominent intrahousehold commitment regimes: full commitment, no commitment, and limited commitment. We propose a test that distinguishes among all three alternatives based on how...

This paper studies household labor supply, within the context of an inter-temporal collective model, and three prominent intra-household commitment regimes: full commitment, no commitment, and limited commitment. We propose a test that distinguishes among all three alternatives based on how...

This paper adopts an intertemporal labor supply perspective to propose a test that allows us to distinguish between intra-household non-commitment, limited commitment, and full commitment. It investigates whether, after controling for current and future (expected) wages, past wage shocks have a...

We investigate how intertemporal allocation of monetary rewards is influenced by the size of total budget, with a particular interest in the channels of influence. We find a significant magnitude effect: the budget share allocated to the later date increases with the size of the budget. At the...

This paper estimates intertemporal labor supply responses to two-year long income tax holidays staggered across Swiss cantons. Cantons shifted from an income tax system based on the previous two years' income to a standard annual pay as you earn system, leaving two years of income untaxed. We...

We consider discounted-utility models with a reference stream of outcomes. We provide a common framework for the main empirically supported discount functions in terms of three underlying functions: The delay, speedup and generating functions. Each of the delay and speedup functions can be...

Intertemporal tradeoffs play a key role in many personal decisions and policy questions. We describe models of intertemporal choice, identify empirical regularities in choice, and pose new questions for research. The focus for intertemporal choice research is no longer whether the exponential...

Intertemporal tradeoffs play a key role in many personal decisions and policy questions. We describe models of intertemporal choice, identify empirical regularities in choice, and pose new questions for research. The focus for intertemporal choice research is no longer whether the exponential...

This paper estimates the intertemporal labor supply (Frisch) elasticity of substitution exploiting an unusual tax policy change in Switzerland. In the late 1990s, Switzerland switched from an income tax system where current taxes were based on the previous two years' income to a standard annual...

Dynamic models of labor supply suggest that workers intertemporally substitute labor for leisure as a response to transitory wage changes. Empirical estimates of intertemporal substitution are difficult to interpret as wage changes are rarely transitory and workers may not be able to choose...

Our perception of time is both nonlinear and nonstationary, which makes preference reversals possible. I decompose the sources of dynamic inconsistency into a time acceleration effect and a time compression effect. Standard economic models focus only on the second effect. I show that when the...

The discounted logit is widely used to estimate time preferences using data from field and laboratory experiments. Despite its popularity, it exhibits the "problem of the scale": choice probabilities depend on the scale of the value function. When applied to intertemporal choice, the problem the...

The rate of time preference is traditionally defined as the marginal rate of substitution between current and future consumption. This definition is not applicable when outcomes are indivisible. Such is the case in all discrete-choice dynamic problems which arise, for example, in modeling...