Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Unlike other approaches we include accumulative schooling costs, and provide a full analytical discussion of all determinants of the decision to terminate education and enter the labor market. Further, as we are able to look at a sequence of formal qualification levels, each characterized by various cost and income profiles we can discuss discontinuities and sheepskin effects within this approach. Terms of use: Documents in EconStor mayJEL Code: J24, D81, I20.

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The Radical Innovation Investment Decision RefinedWe refine modelling of the radical innovation decision in this paper by extending real option theory to include non-marginal stochastic jump processes. From the model analytics we determine that the average magnitude and frequency of non-marginal stochastic jump processes are the most important parameters in this highly uncertain decision process. We show that these stochastic shocks imply that investment in radical innovation may very often be too time consuming and/or expensive to remain attractive for private entrepreneurs.

As a direct e¤ect of the …nancial crisis in 2008, public debt began to accumulate rapidly, eventually leading to the European sovereign debt crisis. However, the dramatic increase in government debt is not only happening in European countries. All major G7 countries are experiencing similar developments. What are the implications of this kind of massive de…cit and debt policy for the long term stability of these economies? Are there limits in debt-ratios that qualitatively change policy options? While theory can easily illustrate these limits, where are these limits in real economies? This paper examines the relationship between sovereign debt dynamics and capital formation, and accounts for the e¤ects of the 2008 …nancial crisis on debt sustainability for the four largest advanced economies. We contribute to the literature on …scal sustainability by framing the problem in an OLG model with government debt, physical capital, endogenous interest rates, and exogenous growth. For the calibration exercise we extract data from the OECD for Germany as a stabilization anchor in Europe, the U.S., the U.K., and Japan for almost two decades before the 2008 crisis. Except for intertemporal preferences all parameters are drawn or directly derived from the OECD database, or endogenously determined within the model. The results of the calibration exercise are alarming for all four countries under consideration. We identify debt ceilings that indicate a sustainable and unsustainable regime. For 2011, all four economies are either close to-, or have already passed the ceiling. The results call for a dramatic readjustment in budget policies for a consolidation period and long-term …scal rules that make it possible to sustain su¢ cient capital intensity so that these economies can maintain their high income levels. Current conditions are already starting to restrict policy choices. However, the results also make it very clear that none of these economies would survive a second …nancial crisis such as the one in 2008.

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