This paper analyses Indonesia’s resource mobilisation and public expenditure policies against the backdrop of her inequality trends and macroeconomic policy evolution. It is argued that the country’s fiscal policy stance has been adversely impacted by her monetary and financial sector policies under an open capital account, with attendant regressive distributional implications. Juxtaposing the ...

Myopia is increasingly believed to be a significant determinant of behavior and also plays a central role in justifications for social security and policies toward the taxation of capital. It is important, however, to account for labor supply effects, particularly in light of the preexisting distortion due to labor income taxation. For example, might even actuarially fair social security have t...

This paper examines the optimal (first-best) tax policy in a stochastic representative agent model that exhibits a “keeping up with the Joneses” utility function and imperfectly competitive product markets. We show that the optimal labor tax is a constant, whose sign is determined by the relative strength of consumption externality and monopoly power. Moreover, the optimal capital tax is unambi...

Abstract Do more mobile firms pay lower taxes? Conventional wisdom argues that capital mobility creates downward pressure on corporate taxes, as can threaten to exit. Nevertheless, empirical findings are highly mixed and hard reconcile, partly due a lack of data at the microlevel. Using two comprehensive panel sets with than 780,000 Chinese over decades, we find higher shares effective tax rate...

I take a new look at the long-run implications of taxation through the lens of modern Schumpeterian growth theory. I focus on the latest vintage of models that sterilize the scale effect through a process of product proliferation that fragments the aggregate market into submarkets whose size does not increase with the size of the workforce. I show that the following interventions raise welfare:...

Hidden from the public eye financial capital has been completely reconfigured over the past thirty years in order to bypass nationally-based tax and regulatory regimes. Using the 70 plus tax havens dotted across the globe, wealthy individuals and transnational businesses have adopted highly aggressive tax avoidance strategies, whilst also forcing the governments of mainstream nations to engage ...

We analyze in this paper the growth and welfare consequences arising from the lack of auditing commitment in a credit market with costly state verification. Specifically, two endogenous growth models, of which one allows lenders to commit to costly auditing strategies to identify borrowers’ investment returns and the other does not, are compared. We show that the inability to commit acts as an ...

We analyze in this paper the growth and welfare consequences arising from the lack of auditing commitment in a credit market with costly state verification. Specifically, two endogenous growth models, of which one allows lenders to commit to costly auditing strategies to identify borrowers’ investment returns and the other does not, are compared. We show that the inability to commit acts as an ...

The paper examines the implications of population ageing in an environment of increasingly mobile capital and labour. I first present three benchmark models for world savings, capital-output ratios and returns to capital and then examine their relevance for the world economy and their policy implications. The mechanics of capital deepening triggered by declining birth rates are presented in a S...

An important puzzle in corporate taxation is that effective tax rates have fallen significantly while tax revenue has simultaneously risen in most countries. Moreover, the gross profitability of firms seems to be lower in high-tax countries, even though standard models of international investment would yield the opposite conclusion. We offer an explanation for these stylized facts by setting up...