Public Policy in Macroeconomic Models with Incomplete Markets

Scheffel, Martin

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URN: urn:nbn:de:bsz:180-madoc-32049
Document Type: Doctoral dissertation
Year of publication: 2011
Place of publication: Mannheim
Publishing house: Universität Mannheim
University: Universität Mannheim
Evaluator: Krebs, Tom
Date of oral examination: 27 September 2011
Publication language: English
Institution: School of Law and Economics > VWL, insbes. Makroökonomik u. Wirtschaftspolitik (Krebs)
Subject: 330 Economics
Classification: JEL: E2 E24 E60 E62 H21 ,
Subject headings (SWD): Makroökonomie , Arbeitsmarkttheorie , Steuer , Staatstätigkeit , Unvollkommener Markt
Keywords (English): public policy , macroeconomics , incomplete markets , unemployment insurance , optimal taxation , general equilibrium
Abstract: This thesis consist of three self-contained papers linked by a common topic: positive and normative analysis of public policy when human capital investment is risky and private insurance markets against labor income risk are missing. The failure of private insurance markets makes room for welfare improving public policies that provide some insurance against labor income and employment risk. In addition, publicly provided consumption services leave income risk unaffected but reduces consumption risk. This relationship is not taken into account by the households' portfolio decisions. The presence of idiosyncratic uninsurable labor income risk makes public policies that encourage more risk taking beneficial. The first paper (chapter 2 of this thesis) is joint work with Tom Krebs and introduces a labor market search model in which unemployed households choose their search effort. After having established some characterization results of the competitive equilibrium, we apply a calibrated version of the model economy to evaluate employment, growth and, in particular, welfare effects of the recent major labor market reform in Germany, that was implemented in 2005 and 2006. The second paper (chapter 3 of this thesis) is single authored and builds on the model developed in the previous paper, but in contrast of making a positive statement on the effect of labor market reforms, I now take a normative approach and analyzed the optimal unemployment insurance system when the households' search effort decisions are only private information such that the government cannot make benefit payments conditional on the exerted search effort. The third paper (chapter 4 of this thesis) is joint work with Tom Krebs and introduces publicly provided consumption services that are financed through capital, labor and consumption taxes. Because there is an implicit shift from risky private consumption towards risk-free publicly provided consumption services that is not taken into account by the households' optimization decision, distortative tax systems may be welfare improving. In this paper, we take a normative approach and derive the optimal welfare improving tax system.
Translation of the title: Staatstätigkeit in macroökonomischen Modellen mit unvollständigen Märkten (German)
Translation of the abstract: --- (German)
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