• Selected
• Entire List

Abstract:
Fundraisers often start their campaigns by soliciting the wealthier, more recognized and respected individuals in a community. We examine whether an explanation for such a solicitation ordering may be that people prefer to associate with those of higher social ranking than themselves. Using a simple linear example we demonstrate that concerns for status may give rise to an optimal solicitation ordering similar to that used by fundraisers. Aggregate contributions and earnings are larger when high-status donors are solicited before rather than after those of low status. To investigate this comparative static experimentally we induce a status differential in the laboratory and reverse the contribution order between high- and low-status participants. We find that low-status followers are likely to mimic contributions by high-status leaders and this encourages high status leaders to contribute. Contributions are therefore larger when individuals of high status contribute before, rather than after, those of low status.

Charitable giving, social status, voluntary contribution games

Abstract:
Large publicly-held pools of assets are playing an increasingly prominent role in the global investment arena. We compare three distinct forms of such public funds, namely foreign exchange reserve funds, sovereign wealth funds, and public pension funds, to highlight their differences and similarities. We review previous studies on ways to better secure prudent and economically sound public fund management practices in these funds, as well as how to evaluate their governance and investment policies and how to better protect the assets from political interference. Drawing from the pension and corporate finance literature, we also link their management to governance practices and country-specific characteristics, and contrast those with empirical findings on linkages with corporate governance.

Abstract:
This paper analyzes a fully funded social security system under the assumption that agents face temptation issues. Agents are required to save through individually managed Personal Security Accounts without, and with mandatory annuitization. When the analysis is restricted to CRRA preferences our results are congruent with the literature indicating that the complete elimination of social security is the reform scenario that maximizes welfare improvement. However, when self control preferences are introduced, and as the intensity of self control becomes progressively more severe the "social security elimination" scenario loses ground very rapidly. In fact, in the case of very severe temptation the elimination of social security becomes the least desirable alternative. Under the light of the above findings, any reform proposal regarding the social security system should consider departures from standard preferences to preference specifications suitable for dealing with preference reversals.

funded social security, unfunded social security, self-control preferences

Abstract:
We analyse the optimal auction of multiple non-identical objects when buyers are risk averse. We show that the auction formats that yield the maximum revenue in the risk neutral case are no longer optimal. In particular, selling the goods independently does not maximize the seller's revenue. We observe that the seller's incentive for bundling arises solely due to the risk aversion of the buyers. The optimal auction which remains weakly efficient has the following properties: The seller perfectly insures all buyers against the risk of losing the objects(s) for which they have high valuation. While the buyers who have high valuation for both objects are compensated if they do not win either object, the buyers who have low valuation for both objects incur a positive payment to the seller in the same event.

Multi-object auctions, optimal auctions, multi-dimensional screening, bundling

Abstract:
We investigate welfare and aggregate implications of a pay-as-you-go (PAYG) social security system in a dynastic framework in which individuals have self-control problems. The presence of self-control problems induces individuals to save less because of their urge for temptation towards current consumption. Individuals’ efforts to balance between the short-term urge for temptation and the long-term commitment for consumption smoothing result in self-control costs. In this environment PAYG social security works as a self-control cost reducing device. In contrast, the presence of altruism induces individuals to save more. This in turn mitigates the adverse affects of self-control problems and PAYG social security on savings but magnifies the self-control costs. We find that in our environment the adverse welfare effects of a PAYG system are further mitigated relative to the environments that incorporate altruism and self control issues separately. Interestingly, the welfare effects vary significantly across different types of households. Richer households demand more PAYG social security as they face larger self-control costs.

Temptation, Self-control preferences, Altruism, Social security, Dynamic general equilibrium, Overlapping generations, Welfare

Abstract:
The complex matrix of retirement policy trade-offs -encompassing elements of paternalism, market failure, and overlaying incentives in a life-cycle context- have received much attention in the literature. But the issue of whether publicly-funded retirement provision should be means-tested, and if so how, has received limited attention, although it has been highlighted from time to time. This paper examines the economic welfare effects of means testing using a stochastic overlapping generations model calibrated to the UK economy. A labor-leisure choice is incorporated, with multiple individuals with different endowments of effective labor. Our results indicate that a change in the taper rate has implications for both welfare and economic aggregates. In particular, with a second tier pension in place, it is welfare improving to strictly means-test the …first pillar. In contrast to much received wisdom, higher taper rates increase social welfare.

Means-Tested Pensions, Welfare, Social Security

Abstract:
We analyse the welfare effects of an unfunded social security system. We do so using an overlapping generations economy wherein agents have self-control preferences, face mortality risk, individual income risk, and borrowing constraints. Given our specification of preferences, unfunded social security helps reduce the agents' temptation to consume in every period; consequently, the welfare costs it otherwise entails are substantially mitigated. While both social security and self-control when considered separately reduce welfare, their combination renders this effect considerably less severe. Moreover, if the cost of resisting temptation is very high, the introduction of social security might even improve welfare.

Quasi-hyperbolic discounting, self-control preferences, unfunded social security