In the coming decades, the share of people in working age will fall significantly in most developed countries. According to optimal taxation theory, public debts should be reduced before the baby-boom generation retires. I find that if debts are instead maintained at the current levels, welfare...

What structure of income taxation maximizes the social benefits of redistribution while minimizing the social harm associated with distorting the allocation of labor input? Many authors have advocated scrapping the current tax system, which redistributes primarily via marginal tax rates that...

The paper analyses fiscal sustainability of public debt using a dynamic computable general equilibrium model. First, we identify the short-term risk for fiscal stress at country level; second, we investigate the assumption of convergence towards the government debt threshold (medium-term...

In the context of a sticky price DSGE model subject to government expenditure and preference shocks where governments issue only nominal non-contingent bonds we examine the implications for optimal inflation of changes in the level and average maturity of government debt. We analyse these...

In this paper we argue that very high marginal labor income tax rates are an effective tool for social insurance even when households have preferences with high labor supply elasticity, make dynamic savings decisions, and policies have general equilibrium effects. To make this point we construct...

In an endogenous growth model where the fiscal authority cannot commit to policy decisions beyond the current period, we explore the time-consistent optimal choice for two policy instruments: the income tax rate and the split of government spending between utility bearing consumption and...

We develop a theoretical framework in which political and economic cycles are jointly determined. These cycles are driven by three political economy frictions: policymakers are non-benevolent, they cannot commit to policies, and they have private information about the tightness of the government...

A planner sets a lump sum transfer and a linear tax on labor income in an economy with incomplete markets, heterogeneous agents, and aggregate shocks. The planner's concerns about redistribution impart a welfare cost to fluctuating transfers. The distribution of net asset holdings across agents...

This paper studies optimal dynamic tax policy under the threat of political reform. A policy will be reformed ex post if a large enough political coalition supports reform; thus, credible policies are those that will continue to attract enough political support in the future. If the only...

According to Kim and Lee (1997), property taxes as opposed to capital gain taxes and taxes on rent endanger dynamic efficiency. The present paper shows that the choice of the tax base is immaterial. What counts is whether the taxes eliminate the after-tax rent. Empirical evidence suggests that...