Centro Atlántico de Estudios Ríos Pérez

All around the world, developed countries have resorted to parametric reforms of their Social Security systems, in an attempt to lessen the impact of the population aging. In this paper we explore the capacity of these reforms to alleviate the expected financial difficulties of current PAYG systems. This is accomplished by developing a Heterogeneous Agents, Applied General Equilibrium model where individuals can freely adjust their retirement ages in response to the incentives provided by the pension regulations. We find that the calibrated model successfully reproduces the basic stylized facts of retirement behavior in Spain. In particular, it mimics the early retirement pattern of low income workers under the effects of minimum pensions. The model is then used to explore the effects of several changes in pension formula, including the reform actually implemented in 1997. The general conclusion is that parametric changes can significantly improve the financial condition of the system, but are not enough to fully restore it.

This paper asks what explains the reduction in the college attainment gender gap in the U.S. over the last decades. The fraction of males attending college relative to females has decreased from 1.57 in the mid seventies to 1.19 at the beginning of the nineties. We use a model where parents make decisions on daughters and sons' education taking into account the e®ect of education on earnings, marriage opportunities, fertility and home production. The main ¯finding is that observed changes in earnings and fertility can account for a fair amount of the decrease in the sex college attainment ratio, however observed changes in marital status and marital sorting imply a decrease in college attainment of women.

In this paper, we study the optimal choice of public expenditures when there is no way of committing to future policy and ``reputational'' mechanisms are not operative. This amounts to confining our attention to Markov equilibria. The environment is a neoclassical growth model where consumers derive utility from a public good. This environment gives rise to a dynamic game between successive governments and the private sector and this game is made interesting by the presence of a state variable: the capital stock. We characterize equilibria in terms of an intertemporal first--order condition (a ``generalized Euler equation'', GEE) for the government and we use this condition both to gain insight into the nature of the equilibrium and as a basis for computation.

The GEE reveals how the government optimally trades off tax wedges over time. It also allows us to discuss in what sense a current government may be strategically influencing future governments in their taxation decisions. For a calibrated economy, we find that when the tax base available to the government is capital income---an inelastic source of funds at any moment in time---the government still refrains from taxing at high rates in order to smooth distortions over time. As a result, the economy is far from the mix of public and private goods that would be optimal in a static context; in return, the savings distortion is not very severe and the capital stock is quite high.

The present paper studies resource allocation in an expanding product variety framework a la Romer (1990). We consider the limiting case where net returns to specialization are zero and, therefore, R&D is completely useless, socially. Nevertheless, the market equilibrium involves allocation of resources to R&D, and this wasteful allocation may take place even in a steady state.

This paper presents an endogenous growth model with R&D in order to jointly explain the productivity slowdown and the rising wage inequality suffered by developed Wold during the last three decades. An increase in technological complexity makes new technology more intensive in skilled labor, rising the demand for this factor and its wage. This increment in skill wage reduces the demand for new technologies, which are more intensive in skilled labor, inhibiting R&D and technological change.

This paper quantifies the size of precautionary savings implied by a dynamic general equilibrium model with heterogeneous agents when explicitly considering the labor supply decision of households. Key parameters as the intertemporal elasticities of substitution of consumption and leisure are obtained from observed household behavior by calibrating the model to reproduce in equilibrium relevant statistics from micro data. I ¯nd that precautionary savings are smaller than if they were measured by use of a model economy without labor decision and that they can even be negative. In addition, the incomplete markets economy is smaller in size than its complete markets counterparts. That is to say, aggregate output is smaller, between 82% and 94% of aggregate output in the complete markets economies. These result are in stark contrast to the ones implied by models without labor choice as Aiyagari (1994) and are due to the importance of hours as a mechanism to confront wage fluctuations.

Over the past twenty years there has been a 87% increase of the married women's employment rate and a 48% decrease of the fertility rate in Spain. This paper focus on the increase of the marital dissolution rate, following the introduction of the Divorce Law at the beginning of the eighties, as a possible explanation (the probability of divorce went from 0.5% to 2.1%). A model on the economics of the family, in which labor market and fertility decisions are made, is used to measure such e.ects. It is found that the increase of divorce risk explains 15%, 44% or 0% of the change in married women's full-time employment rate, depending on women's education, and 45% of the decrease of the fertility rate. So, contrary to what some people argue, the decrease of the fertility rate observed in Spain is not so closely related to the increase of women attachment to the labor market, there are other possible explanations. The model provides a good framework for the evaluation of certain social policies that target the reconciliation of family and labor life.

The dynamic heterogeneous economies studied are described by a collection of heterogenous indi- viduals, their individual states and an aggregate state, such that the individuals' actions are given by the policy obtained from an optimization program and the aggregate law of motion is given by the aggregation of the individuals' actions. These economies have been used in computer simula- tions, however the analytical information about the equilibria of such economies is scarce and the classical approach of Stokey and Lucas with Prescott (1989) does not apply. This paper denes the relevant concepts of equilibria and proves the existence of such equilibria using the Schauder Fixed Point Theorem. In order to apply Schauder's theorem, a metric for the space of operators between measures is provided, and the compactness of a specic operator is proved. Moreover, the existence of a steady state for the aggregate state of the system is obtained through the Schauder-Tychonov Theorem. The results are related to models available in the literature.

Habit formation has been proposed as a possible solution for explaining the equity premium puzzle. This paper extends the class of models that support the habits explanation in order to account for heterogeneity in earnings, wealth, habits and consumption. I find that habit formation increases the equity premium. However, contrary to the earlier results in the literature, the habit hypothesis does not imply a price for risk much higher than the one implied by models with intertemporally separable preferences. The main reasons for this are general equilibrium ones. First, with just two assets available, households can smooth out consumption fluctuations very well. Therefore, the higher utility losses of uncertainty imposed by habits will not command a high price of risk because households manage to avoid this risk. Second, the composition of the set of agents pricing the assets is sensitive to changes in the model. In an economy with habits, pricing agents turn out to be households facing very small consumption fluctuations. In addition I characterize three important properties of the model economy that relate to portfolio choice: willingness to hold risky assets (1) increases with wealth, (2) decreases with labor earnings and (3) decreases with habit stock.