A collection of papers unloved by the profession.
Policy in a Model with Heterogeneous Time Preference.
Coauthored with James
Redekop (University of Waterloo).
December 1997. This paper was
rejected at three journals and died as a revise and resubmit at another.
Abstract:We examine how redistribution policy
affects the distribution of income when human capital accumulation is
endogenous and the fundamental source of heterogeneity in the economy
stems from varying degrees of time preference across members of the
population. In comparing the steady states of a dynamic general
equilibrium model calibrated to the Canadian economy, we find that
progressively more generous income transfer programs (financed with a
flat income tax) lead to only modest decreases in income inequality,
but significant increases in earnings inequality and large losses in
per capita output. With the exception of the bottom income quintile,
individuals display a strong preference for the long-run situation
associated with the absence of government redistribution policy.
Nevertheless, taking into account transition dynamics, a majority of
individuals would vote for implementation of redistribution policy. The
distribution of time-preference plays a critical role in generating
this last result.
Preference and the Distribution of Wealth. Coauthored with
James Redekop (University of Waterloo).
Original Version: July 1998. This paper had some potential.
Abstract: This paper
analyzes a dynamic model in which physical capital can be accumulated
or depleted, and labour supply is endogenous. The distribution of
income is then endogenously determined by both technological parameters
of production, and the distribution of agents' discount parameters.
Degenerate wealth distributions, in which only the most patient agents
have any wealth, are avoided by having a fraction of the agents die
each period, and bequeath their wealth to descendants with
independently random discount parameters. On average, more patient
agents will have higher wealths and incomes, but in the short run
agents' stocks of wealth depend on their inherited wealth. If a patient
individual lives long enough, she will retire and live on only
investment income, while if an impatient individual lives long enough,
he will deplete all his wealth and live on only labour earnings. The
effects of a general increase in patience are an increase in the wage
rate, a lowering of the return on capital, and general increases in
wealth, income, and utility. Possibilities for engineering such an
increase, by promoting ``artificial patience'', could include
favourable taxation of investment income, forced savings such as
payroll-tax financed pension plans, or public subsidies for education