infonet-economy

For pay-as-you-go financed pension systems, claims may be calculated according to individual contributions (income) or the number of children of a family. We analyse the optimal structure of these parameters in a model with endogenous fertility. It is shown that for both structural determinants there exists no interior solution of the problem of intragenerational utility maximisation. Thus, pure systems are always welfare maximizing. Furthermore, children-related pension claims induce a fiscal externality
that tends to be positive. The determination of the optimal contribution rate shows that the widely accepted Aaron-condition is in general a misleading indicator for the comparison of fully funded and pay-as-you-go financed pension systems.

An eastern enlargement of the EU, from an incumbent country point of view, involves a fiscal burden from extending Union agricultural and cohesion policies to new members, coupled with potential gains as well as adjustment problems deriving from an extended customs union and a larger single market. Enlargement is controversial, because the net effect is unclear, a priori, and will certainly vary across individual countries. Our two-part contribution tries to do shed light on this controversy. In this first part, we present a general treatment of the likely effects on different incumbent countries, while a subsequent companion paper will take a closer look at the specific
case of Austria. The general view of part I, in turn, first focuses on various empirical measures highlighting crucial differences between incumbents, pertaining to the fiscal burden on the one hand, and integration gains on the other. We then argue that a proper evaluation must rely on an explicit welfare criterion, and we use a general model of economic integration in order to identify the principal channels through which aggregate welfare of an incumbent country is affected by an enlargement of the EU. We address traditional effects of trade creation and trade diversion, as well
as growth effects arising from an abolition of trade barriers. In addition, we ask how enlargement affects foreign direct investment and labor migration, and what this implies in welfare terms for an
incumbent western European country. Taken together, these effects generate a certain presumption of integration gains, which need to be set against the fiscal burden. However, a final judgement requires
a case-by-case approach, based on empirical implementations of enriched and parameterized models for specific countries. The companion paper, therefore, uses a suitably specified, calibrated dynamic equilibrium model, in order to take a closer look at the Austrian case.

In this paper the role of information asymmetries between regions and a centralized authority is analyzed. In a model with inter-regional externalities due to capital mobility and a source-based tax instrument, we first derive conditions for which the optimum can be implemented by an adequately designed institution even with decentralized information about preferences for redistribution. Second we demonstrate that social-policy does not have to be centralized in order to implement the optimum. Decentralization of social policies is compatible with efficiency even when source-based taxes have to be used if decentralized authorities can rely on the enforcement
of bilateral contracts.

In this paper we analyze the optimal mix between appropriative and defensive activities for goods (goods contest) and appropriative and defensive activities for resources (resource contest). We show that goods contests are qualitatively different from resource contests. It turns out that for plausible cases the resource contest is dominated by the goods contest in the sense that investments are only positive in the latter.

We analyze the optimal relationship between the public and private enforcement of property rights for the case of rival and nonrival goods. Exclusion is interpreted as a costly activity, which allows it to endogenize the distinctions between public and club goods on the one hand and between private and common-pool goods on the other. We characterize optimality conditions for the private provision of rival and nonrival goods, characterize optimal enforcement policies, and compare the solutions with other institutional alternatives.

In a recent contribution to Constitutional Political Economy, Azariadis and Galasso argued that due to the fact that constitutions allow for a partial precommitment of the individuals, constitutional rules are a good means to guarantee an efficient level of redistribution between generations. I argue that constitutional rules have no inherent advantage with respect to commitment compared to other rules. However, the beneficial role of constitutions stems from their ability to create a focal point that helps to solve the equilibrium selection problem.