International environmental protection like the combat of global warming exhibits properties of public goods. In the international arena, no coercive authority exists that can enforce measures to overcome free-rider incentives. Therefore decentralized negotiations between individual regions serve as an approach to pursue efficient international environmental protection. We propose a scheme which is based on the ideas of Coasean negotiations and Pigouvian taxes. The negotiating entities offer side-payments to counterparts in order to influence their taxation of polluting consumption. Side-payments, in turn, are self-financed by means of externality-correcting taxes. As we show, a Pareto-efficient outcome can be attained. Copyright (c) The London School of Economics and Political Science 2009.

Individuals behave with choice probabilities defined by a multinomial logit (MNL) probability distribution over a finite number of alternatives which includes utilities as parameters. The salient feature of the model is that probabilities depend on the choice-set, or domain. Expanding the choice-set decreases the probabilities of alternatives included in the original set, providing positive probabilities to the added alternatives. The wider probability 'spread' causes some individuals to further deviate from their higher valued alternatives, while others find the added alternatives highly valuable. For a population with diverse preferences, there exists a subset of alternatives, called the optimum choice-set, which balances these considerations to maximize social welfare. The paper analyses the dependence of the optimum choice-set on a parameter which specifies the precision of individuals' choice ('degree of rationality'). It is proved that for high values of this parameter the optim

International environmental protection like the combat of global warming exhibits properties of public goods. In the international arena, no coercive authority exists that can enforce measures to overcome free-rider incentives. Therefore decentralized negotiations between individual regions serve as an approach to pursue efficient international environmental protection. We propose a scheme which is based on the ideas of Coasean negotiations and Pigouvian taxes. The negotiating entities offer side-payments to counterparts in order to influence their taxation of polluting consumption. Side-payments, in turn, are self-financed by means of externality-correcting taxes. As we show, a Pareto-efficient outcome can be attained. Copyright (c) The London School of Economics and Political Science 2009.

Abstract

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International environmental protection like the combat of global warming exhibits properties of public goods. In the international arena, no coercive authority exists that can enforce measures to overcome free-rider incentives. Therefore decentralized negotiations between individual regions serve as an approach to pursue efficient international environmental protection. We propose a scheme which is based on the ideas of Coasean negotiations and Pigouvian taxes. The negotiating entities offer side-payments to counterparts in order to influence their taxation of polluting consumption. Side-payments, in turn, are self-financed by means of externality-correcting taxes. As we show, a Pareto-efficient outcome can be attained.

It has been argued that increased life expectancy raises the rate of return on education, causing a rise in the investment in education followed by an increase in lifetime labor supply. Empirical evidence of these relations is rather weak. Building on a lifecycle model with uncertain longevity, this paper shows that increased life expectancy does not suffice to warrant the above hypotheses. We provide assumptions about the change in survival probabilities, specifically about the age dependence of hazard rates, which determine individuals' behavioral response w.r.t. education, work and age of retirement. Comparison is made between the case when individuals have access to a competitive annuity market and the case of no insurance.

It has been argued that increased life expectancy raises the rate of return on education, causing a rise in the investment in education followed by an increase in lifetime labor supply. Empirical evidence of these relations is rather weak. Building on a lifecycle model with uncertain longevity, this paper shows that increased life expectancy does not suffice to warrant the above hypotheses. We provide assumptions about the change in survival probabilities, specifically about the age dependence of hazard rates, which determine individuals' behavioral response w.r.t. education, work and age of retirement. Comparison is made between the case when individuals have [...]

Two salient features of modern economic growth are the rise in aggregate savings rates and the steady increase in life expectancy. This paper links these processes, showing that under certain conditions economic theory supports the hypothesis that increased longevity leads to higher aggregate savings in steady state. The analysis is based on a lifecycle model with uncertain longevity in which individuals choose an optimum consumption path and a retirement age. Conditions on the age-specific pattern of improvements in survival probabilities are shown to ensure that individual savings rise with longevity and that aggregation preserves this result. Population theory (Coale (1972)) is used to link the steady-state age density function and the population's growth rate to individuals' survival probabilities. The importance of a competitive annuity market in avoiding unintended bequests is underscored.

It has been argued that increased life expectancy raises the rate of return on education, causing a rise in the investment in education followed by an increase in lifetime labor supply. Empirical evidence of these relations is rather weak. Building on a lifecycle model with uncertain longevity, this paper shows that increased life expectancy does not suffice to warrant the above hypotheses. We provide assumptions about the change in survival probabilities, specifically about the age dependence of hazard rates, which determine individuals' behavioral response w.r.t. education, work and age of retirement. Comparison is made between the case when individuals have access to a competitive annuity market and the case of no insurance.

This chapter discusses how benefits vary with the age of retirement beyond the earliest eligibility age, including how retiring ahead of the normal retirement age reduces benefits by a certain percentage annually, particularly in the United States. It cites the need for a good and flexible retirement system to accommodate diversity in terms of life expectancy, income levels, and the degree of difficulty in continuing labor. It describes a pattern in the United States called delayed retirement credit (DRC), and actuarial reduction factor (ARF). It also argues that the system should be neutral in its approach to individual retirement decisions, assuming that the system would preserve optimal individual decisions on retirement.

Regular annuities provide payment for the duration of an owner's life-time. Period-Certain annuities provide additional payment after death to adesignated beneficiary provided the insured dies within a certain period after annuitization. It has been argued that the bequest option offered by the latter is dominated by life insurance which provides non-random bequests. This is correct if competitive annuity suppliers have full information about individual longevities and price annuities accordingly. In contrast, this paper shows that when individual longevities are private information, a competitive pooling equi-librium which offers annuities at common prices to all individuals may have positive amounts of both [...]

When information on longevity (survival functions) is unknown early in life, individuals have an interest in insuring themselves against moving into different 'risk-classes' as their life expectancy is revealed. The First-Best allocation involves transfers across states of nature. With symmetric information, competitive equilibrium separates different risk classes and cannot provide such transfers because insurance firms are unable to precommit. When utility is invariant to risk-class realisation, the optimum entails uniform consumption and optimum retirement age independent of risk-class and an optimum social security scheme is superior to competitive equilibrium. When preferences depend on risk-class, welfare ranking of systems becomes indeterminate.

When information on longevity (survival functions) is unknown early in life, individuals have an interest in insuring themselves against moving into different 'risk-classes' as their life expectancy is revealed. The "First-Best" allocation involves transfers across states of nature. With symmetric information, competitive equilibrium separates different risk classes and cannot provide such transfers because insurance firms are unable to "precommit". When utility is invariant to risk-class realisation, the optimum entails uniform consumption and optimum retirement age independent of risk-class and an optimum social security scheme is superior to competitive equilibrium. When preferences depend on risk-class, welfare ranking of systems becomes indeterminate. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

This paper extends the standard model of optimum commodity taxation (Ramsey, F., 1927. A Contribution to the Theory of Taxation. Economic Journal 37, 47–61; Diamond, P., Mirrlees, J., 1971. Optimal Taxation and Public Production, II: "Tax Rules". American Economic Review 61, 261–278) to a competitive economy in which markets are inefficient due to asymmetric information. Insurance markets are prime examples: consumers impose varying costs on suppliers but firms cannot associate costs with individual customers and consequently all are charged equal prices. In such a competitive pooling equilibrium, the price of each good is equal to the average of individual marginal costs weighted by equilibrium quantities. We derive modified Ramsey–Boiteux Conditions for optimum taxes in such an economy and show that, in addition to the standard formula, they include first-order effects which reflect the deviations of prices from marginal costs and the response of equilibrium quantities to the taxes