It is well known that research and development (R&D) is an important engine for economic growth. Also, initial wealth inequality and subsequent economic growth are well known to be related. This paper links inequality and R&D-driven growth. It shows that in a class of economies where R&D is the main engine for growth, di¤erent wealth groups di¤er in their desire for aggregate innovative e¤orts:...

A windfall of natural resource revenue (or foreign aid) faces government with choices of how to manage public debt, investment, and the distribution of funds for consumption, particularly if the windfall is both anticipated and temporary. We show that the permanent income hypothesis prescription of an ever-lasting increase in consumption financed by borrowing ahead of the windfall and then accu...

International markets for tradable emission permits (TEP) co-exist with national energy taxation. A firm trading emission permits in the international market also pays energy taxes in its host country, thus creating an interaction between the international TEP-market and national energy taxes. In this paper we model that interaction in a framework of a perfectly competitive international TEP-ma...

On the Optimality of Search Matching Equilibrium When Workers Are Risk Averse This paper revisits the normative properties of search-matching economies when homogeneous workers have concave utility functions and wages are bargained over. The optimal allocation of resources is characterized first when information is perfect and second when search effort is not observable. To decentralize these o...

The paper investigates the stabilizing potential of fiscal policy in a monetary union. The discussion about fiscal stabilization policy has been revived in the context of EMU. We consider a taxation-based stabilization policy, where the fiscal authority intends to minimize the output gap. As policy instrument, we consider a time-varying component in taxes on consumption. The model combines a mo...

We examine optimal taxation and social insurance with adverse selection in competitive insurance markets. In the previous literature, it has been shown that, with perfect insurance markets, social insurance improves welfare since it is able to redistribute without creating distortions. This result has been taken as robust to the introduction of adverse selection as this would only provide addit...

Optimal Redistributive Taxation with Both Extensive and Intensive Responses This paper characterizes optimal income taxation when individuals respond along both the intensive and extensive margins. Individuals are heterogeneous across two dimensions: specifically, their skill and disutility of participation. Preferences over consumption and work effort can differ with respect to the level of sk...

This paper explores, through the use of a sequence of computable general equilibrium models, what harm or good, as measured both in terms of real output and utility, might be accomplished through coordinated perturbations in excise and income tax policy among sovereign jurisdictions. We focus on two issues: the taxation of below-retail transactions and the taxation of E-commerce across state li...

A major problem of the positive theory of income taxation is to explain why statutory income tax schedules in practice are marginal-rate progressive. While it is commonly believed that this is but a simple consequence of the fact that the number of relatively poor voters exceeds that of richer voters in general, putting this contention in a voting equilibrium context is not a trivial task. We d...

Taxing internationally mobile factors of production has been dismissed as an inefficient means of raising tax revenue. This paper addresses the question of whether it is efficient to tax capital at source when labor markets and the taxation of lumpsum income suffer from imperfections. Four reasons for taxing capital are identified: (i) institutional constraints rendering any taxation of profit ...