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...

Despite the intensifying debate over the taxation of Internet commerce, the relevant issues have not been given a systematic treatment in the context of the literature on optimal taxation. This article presents such an analysis and investigates separately the taxation of business purchases of intermediate goods, the taxation of consumer purchases of final goods and services, and the various iss...

We build a model where a buyer negotiates a price discount with a seller in exchange for not asking the receipt and paying in cash, allowing tax evasion. Sellers and buyers are heterogeneous with respect to their tax morale and to their cost of managing payment instruments different from cash. We study how a tax rebate for the buyer and a tax on cash withdrawals affect tax evasion and governmen...

This paper studies optimal taxation in a Dixit–Stiglitz model of monopolistic competition. In this setting, taxes may be used as an instrument to o¤set distortions caused by producer markups. Since markups tend to be higher in industries where …rms face less elastic demand, tax rates will be pushed lower in these industries. This tends to work against the familiar inverse elasticities intuition...

This paper studies the role of transfers among groups within a country as well as among countries in a two level game of international trade negotiations. We show that in order to realize the intended transfer in the presence of asymmetric information on the states of recipients (and donors), a transfer process uses up additional resources. The difficulty of making transfers renders it less lik...

Using a model of nonlinear decay of the stock pollutant, and starting from the same initial conditions, the paper shows that an optimal tax that corrects for both stock and ßow externalities may result in a lower tax, fewer cumulative emissions (less decay) and higher output at the steady state than a corrective tax that ignores the ßow externality. The “more is less” result emphasizes that set...

This paper analyses the optimal tax policy and public provision of private goods when individuals di¤er in two respects: income-earning ability and rationality. Publicly provided goods should be overprovided or subsidised, relative to the decentralised optimum, if society’s marginal valuation of them exceeds the individual valuation and if these goods help relax the self-selection constraints, ...

In this paper, I examine a model economy with production, search, and unemployment insurance. The introduction of capital into the economy of Wang and Williamson (2001) generates the result that optimal replacement ratios are always zero. The result arises from the decline in aggregate activity caused by unemployment insurance: both capital and labor inputs to production fall when benefits rise...

We develop a model of education where individuals face educational risk. Successful graduation depends on individual effort to study and public resources. After realization of risk, they either work as skilled or as unskilled worker. We show that an optimal public policy consists of tuition fees combined with skill-contingent loans, lump-sum transfers/taxes, and public funding of the educationa...