James Sefton

Pole/zero cancellations in the general H ∞ problem with reference to a two block design

Abstract Necessary and sufficient conditions are given for pole/zero cancellations in the close--loop transfer function from input disturbances to error signals in the general H ∞ problem. These pole/zero cancellations can place restrictions on the suitability of particular H ∞ design procedures. This will be shown by reference to a typical two-block design procedure.

Simulating the transmission of wealth inequality via bequests

Answering the question of how much wealth inequality arises from inheritance inequality requires data that are unavailable and potentially uncollectable. The alternative approach taken here (from Blinder [1974, 1976] and Davies [1982]) is to simulate the transmission of inequality via bequests.

Means Testing Retirement Benefits: fostering equity or discouraging savings?*

Means testing plays an important role in the UK state pension system. We use a dynamic programming model to consider the long-term behavioural effects of a recent policy reform that reduced the marginal tax rates on private income of means tested retirement benefits from 100% to 40%. Our analysis suggests that the policy reform will encourage the poorest third of all households (based on wealth at age 65) to both save more and delay retirement, and have the opposite effects on richer households. In aggregate, the off-setting behavioural responses that we identify imply an overall delay in the timing of retirement, a fall in average savings, and a small effect on the government budget. We find that, on balance, the policy reform provides a reasonable compromise between the distortions associated with high marginal tax rates, and the costs implied by universal benefits provision.

The net national product and exhaustible resources: The effects of foreign trade

Abstract It is the widely held view that estimates of national income should be corrected for the value of the extracted exhaustible resource stock. This correction implies the counter-intuitive result that the national income of an oil producer is unaffected by its vast oil reserves. In this paper we review the definition of national income, and discuss its relation to national welfare. We show that an extra income should be imputed to the resource-owning country based on the exportable resource stock. Part of the net adjustment for resource use is made to the income of the resource-using and not the resource-producing country.

Generational Accounting in the UK

This paper presents the first set of generational accounts for the United Kingdom. We find that under our baseline scenario, in which pensions are price indexed and health expenditure grows modestly, the imbalance in UK generational policy is small when compared with other leading industrial countries like the United States, Japan, and Germany. However, under an alternative policy scenario, where all social benefits are wage-indexed and health care spending is increased, there is a larger fiscal bill left for future generations to pay. In this case, achieving generational balance would require much stronger medicine.

On the gap metric and coprime factor perturbations

Abstract New conditions are derived for when the distance between two linear systems in the gap metric is less than one. By including a coprimeness assumption in the coprime factor uncertainty description it is shown that an open ball in the gap metric is equivalent to an open ball phrased in terms of coprime factor perturbations. A new criterion is given for robust stabilization.

Stability of control systems and graphs of linear systems

New conditions for internal stability of a closed-loop control system are given in terms of the graphs of the multiplication operators induced by the transfer functions of the plant and the controller. These conditions can be given a geometrical interpretation. This relates closed-loop stability to the minimal angle between the graph space associated with the system and the graph space associated with the controller. The maximally stabilizing controller is defined as the controller that maximizes the minimum angle between the graph space associated with the system and the graph space associated with the controller. It is shown that this controller can be calculated as a Nehari extension of the coprime factors of the system.

Fiscal Policy and the Maastricht Solvency Criteria

This paper examines the implications of fiscal policy and growing debt stocks for the economy. The authors construct an extended Mundell-Fleming model, along the lines of W. H. Buiter and M. Miller (1981), that allows them to investigate the effects of fiscal policy and debt accumulation on an open economy. In order to analyze the implications of fiscal restrictions such as the Maastricht convergence criteria, they undertake some policy analyses on their estimated model NiGEM. This model closely resembles the theoretical construct in its long-run structure but allows for crucial differences in the speed of dynamic responses in a number of markets. The authors find that, although in the long term the level of activity is unaffected, the fiscal restrictions will reduce output and raise unemployment in the short to medium term. Copyright 1997 by Blackwell Publishers Ltd and The Victoria University of Manchester

Simulating Household Savings and Labour Supply: An Application of Dynamic Programming

This paper describes a fully behavioural microsimulation model that has recently been developed at the National Institute for considering responses to changes in pension policy of household savings and labour supply. The model generates household decisions regarding labour/leisure, and consumption/savings by solving a dynamic programming problem over the simulated lifetime. This analytical framework incorporates a degree of complexity that is usually omitted from econometric analyses that are common in the literature.

Consumption and Wealth: An International Comparison

This paper derives the discrete-time counterpart of Blanchards overlapping generations model of consumer expenditure. The model is combined with two different models of liquidity-constrained consumers; in the first the percentage of income accruing to such consumers is constant; in the second it is allowed to decrease over time. These models are estimated for five countries over the period 1967-92, and pass all standard specifications as well as some alternative non-parametric tests. Our estimates suggest that in Canada and the USA the number of liquidity-constrained consumers decreased substantially in the late 1970s and early 1980s. In Germany and the UK these changes occurred later and were less pronounced. Copyright 1999 by Blackwell Publishers Ltd and The Victoria University of Manchester