Macroeconomic Effects of Reducing Oasi Benefits

Nelson, Jaeger; Phillips, Kerk L.; Benzell, Seth G.; Berkovich, Efraim; Carroll, Robert; DeBacker, Jason; Diamond, John W.; Evans, Richard; Gokhale, Jagadeesh; Kotlikoff, Laurence J.; LaGarda, Guillermo; Mackie, James B.; Moore, Rachel; Pecoraro, Brandon; Pizzola, Brandon; Ye, Victor Yifan; Zodrow, George R.

doi:10.17310/ntj.2019.4.02

Cited by 7 publications

(4 citation statements)

References 6 publications

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“…However, due to the relative simplicity of the model's structure, the results contained in this article should be interpreted as numerical examples and not as a rigorous quantitative exercise. That said, the key mechanisms through which uncertainty affects household behavior and the macroeconomy will be present in any model that shares this basic structure, such as those discussed in Nelson and Phillips (2019).…”

Section: Discussionmentioning

confidence: 99%

Welfare Implications of Uncertain Social Security Reform

Nelson

2020

Public Finance Review

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Policy uncertainty is a type of aggregate risk that has important economic and welfare implications. In this article, I develop a simple general equilibrium overlapping generations model in which households are uncertain as to the type and timing of an inevitable Social Security reform. I document how households’ expectations over the path of future policy influences their behavior. I find that the economic and welfare effects of policy uncertainty are highly sensitive to households’ beliefs over the path of future policy.

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Section: Discussionmentioning

confidence: 99%

Welfare Implications of Uncertain Social Security Reform

Nelson

2020

Public Finance Review

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“…Our model's closest antecedent is the Global Gaidar Model (GGM), presented in Benzell et al (2020) and (Benzell and Lagarda, 2017), which simulates a variety of corporate and business cash-flow tax reform policies. Similar versions of this model have also been used to investigate the impact of fossil fuel rents on fiscal transitions and to simulate long-term U.S. fiscal sustainability (Nelson and Phillips, 2019).…”

Section: Previous Computable General Equilibrium Modelsmentioning

confidence: 99%

Simulating Endogenous Global Automation

Benzell¹,

Kotlikoff²,

LaGarda³

et al. 2021

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Comparing our baseline transition to a future without automation identifies winners and losers. Western Europe, Japan, Canada, the UK, and the U.S. experience the largest percentage increases in GDP. Compared to no-automation, output in 2050 is, respectively, 12.9, 12.7, 12.1, 10.0, and 5.1 percent larger. China defers automating until 2027. Automation makes slow-or non-automating regions, including India, Brazil, and Sub-Saharan Africa, worse off. This reflects the flow of capital from non-automating to automating regions. Mexico, for example, produces 3.6 percent less output in 2050 due to a 9.2 percent decline in the amount of capital that can profitably operate in that region.We also consider alternate scenarios where access to new technologies is restricted to the U.S., where automation technologies reduce labor input-shares of all skill groups proportionally, and where technological change is more rapid than historical experience. In virtually all cases, automation benefits the U.S. and raises the welfare of middle-and high-skilled American workers. As indicated, relative to no automation, U.S. GDP in 2050 increases by 5.1 percent in our baseline scenario. This figure is 8.3 percent if the new technology is exclusive to the U.S., 6.1 percent if the new technology is not skill-biased, and 11.9 percent if global technological change occurs at twice the historical rate.As suggested by stylized models (e.g. Benzell et al. 2016;Sachs et al. 2015a;Acemoglu and Restrepo 2018a;Peretto and Seater 2013), automation increases the world interest rate. However, this effect is relatively modest in our model and does not significantly deter countries from automating. Absent automation, the global interest rate falls from 6.0 percent in 2017 to 2.8 in 2050. In our baseline scenario, the 2050 interest rate decreases by less -to 3.2 percent. Two fundamental trends contribute to a global savings glut (Eichengreen, 2015). The first is population aging in developed and many emerging regions that raises global wealth per worker. The second is the high saving rate of Chinese and Indian households coupled with their rising share of world GDP.Wage inequality increases dramatically in our baseline scenario. In the U.S, for example, the high-skilled wage increases by 28.8 percent between 2017 and 2050. The low-skilled wage falls by 22.8 percent. In 2050, 92.5 percent of the world's high-skilled workers are better off due to automation. But 85.7 percent of low-skilled workers and 71.5 percent of all workers are worse off. In the same year and relative to no-automation, the world's average worker is 0.9 percent worse off in terms of lifetime welfare, measured as a compensating differential. Our paper's final section considers policy responses. One example is mandating automation in regions that would not otherwise automate. Such 'forced industrialization' policies (see, for example, Preobrazhensky 1926; Erlich 1950) have been pursued historically by the Soviet Union and other countries. In India, but no other region, forced adoption ra...

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“…Since the modeling framework, calibration, and solution algorithm used for the analysis in this article is completely specified in Moore and Pecoraro (2020), details are omitted here for brevity. The core characteristics of the MP-OLG model are common to general equilibrium models of this class, such as those in Nelson et al (2019): finitely lived cohorts of households make labor supply, saving, and consumption choices, discounting utility generated by future choices relative to current choices. Firms demand labor and private productive capital each period for production and sale of an output good that can be transformed by households into a consumable good or a return-bearing financial asset.…”

Section: Model and Policy Experimentsmentioning

confidence: 99%

Dynamic Scoring: An Assessment of Fiscal Closing Assumptions

Moore

Pecoraro

2020

Public Finance Review

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Analysis of fiscal policy changes using general equilibrium models with forward-looking agents typically requires a counterfactual adjustment to some fiscal instrument in order to achieve the debt sustainability implied by the government’s intertemporal budget constraint. The choice of fiscal instrument can induce economic behavior unrelated to the policy change in models where Ricardian Equivalence does not hold. In this article, we use an overlapping generations framework to examine the effects of alternative fiscal closing assumptions on projected changes to economic aggregates following a change in tax policy, assessing the extent to which the bias associated with a particular fiscal instrument can be mitigated. While we find quantitative differences in projected macroeconomic activity across alternative fiscal instruments, these differences tend to shrink as the closing date is delayed. Ultimately, the choice of fiscal instrument becomes relatively unimportant if fiscal closing can be delayed sufficiently into the future.

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Macroeconomic Effects of Reducing Oasi Benefits

Cited by 7 publications

References 6 publications

Welfare Implications of Uncertain Social Security Reform

Welfare Implications of Uncertain Social Security Reform

Simulating Endogenous Global Automation

Dynamic Scoring: An Assessment of Fiscal Closing Assumptions

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