The project contributes to our understanding of the characteristics of important social insurance structures. It continues research on the pricing of alternative health insurance options, including analysis of whether premiums should be different for individuals changing policies and individuals continuing with the same policy. It examines the way retirement benefits should vary with the age of retirement in a model that recognizes individual differences, stochastic employment possibilities, and limited observation of work opportunities. It studies the way taxes and expenditures should vary with the outcome of aggregate risks. The project also continues research on the micro foundations of macroeconomies. It examines the importance of labor market tightness and of impediments to labor mobility for the efficiency of the allocation of labor. Of special interest will be estimates of the loss in efficiency due to the way the existing system of health insurance locks workers into existing employers. Another is the determination of the endogenous distribution of ownership of purchasing power and its effect on aggregate efficiency. The CRAY supercomputer will be used to simulate this extremely complex model. A third is the effect of different forms of money illusion on equilibrium in the housing market. This research will be undertaken jointly with a psychologist and will explore alternative ways of modeling individual decisions on selling houses that integrate psychological and economic concerns.
