Financial Support and its Impact on Self-control

Student: Gasanova Fatima

Supervisor: Georgy Lukyanov

Faculty: International College of Economics and Finance

Educational Programme: Double degree programme in Economics of the NRU HSE and the University of London (Bachelor)

Final Grade: 9

Year of Graduation: 2020

This paper studies optimal government policy in an economy where individuals face privately observed productivity shocks and whose preferences exhibit hyperbolic discounting. We build a stylized two-period model along the lines of M. Amador et al (2006), embedding their logic within a truncated version of overlapping generations setup. The government faces a twofold goal: (i) to make cross-sectional distribution of consumption more equitable (insurance behind the veil of ignorance), and (ii) to correct for distortions in the intertemporal consumption profile. Second-best policies are analyzed assuming that the government has two instruments: lump-sum taxes and the rates of return on savings.

Full text (added June 11, 2020)

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