C ostas Azariadis and Vincenzo Galasso address a basic but very important question about the social security system. What are the incentives for young workers to contribute funds and thus maintain such a system? The issue is to understand the economic and political forces that combine to provide the foundations for a social security system. The starting point of the analysis is perhaps one of t...

Rarely has a piece of social science research received more attention than the 1999 study by Kevin Schulman and others reporting large differences in physicians’ responses to identical heart disease symptoms presented by black and white actors portraying patients. The 720 physician-subjects who participated in the study referred lower proportions of African-American than white age and sex match...

This paper purports to apply the Kydland-Prescott framework of dynamic inconsistency to the case of fiscal policy, by considering the trade-off between output and debt stabilization. The Government budget constraint provides the link between debt dynamics and the level of activity, influenced by fiscal policy. Contrary to what happens in the monetary policy framework, however, a commitment is n...

We study a fiscal policy model in which the government is present-biased towards public spending. Society chooses a fiscal rule to trade off the benefit of committing the government to not overspend against the benefit of granting it flexibility to react to privately observed shocks to the value of spending. Unlike prior work, we characterize rules that are self-enforcing: the government must p...