This paper studies the impact of income inequality on fiscal conservatism when an increase in inequality affects the bottom portion of income distribution. It is argued that, contrary to what is generally assumed in the economic literature, inequality will then be associated with less, rather...

We develop a simple model to study how relative wage rigidity affects equilibrium taxation. It is argued that relative wage rigidity, by compressing incomes within the middle class, leads to a lower degree of redistributive conflict within the politically important core of society, even though...

This paper studies, in a model with unemployment, how labour market status affects the preferences for public spending, in the form of a public good or subsidies. It then derives the implications for the dynamics of government expenditures under the hypothesis of majority voting. These will...

This paper shows that multiple growth paths may occur in a politico-economic model of endogenous growth. This multiplicity is characterized by the coexistence of a low-tax, low-capital-flight equilibrium and a high-tax, high-capital-flight equilibrium. The likelihood of multiplicity is crucially...

In this paper we study the relationship between labour market institutions and monetary policy. We use a simple macroeconomic framework to show how optimal monetary policy rules depend on labour institutions (labour adjustment costs, and nominal and real wage rigidity) and social preferences...

In this Paper, I analyse the pros and cons of implementing structural reforms of the labour market in booms versus recessions, in light of considerations of social efficiency, political viability, and macroeconomic fine-tuning. While the optimal timing of a reform depends on the relative...

We study active labor market policies (ALMP) in a matching model. ALMPs are modelled as a subsidy to job search. Workers differ in their productivity, and search takes place along an extensive margin. An additional job seeker affects the quality of unemployed workers. As a result, the Hosios...

This paper studies aggregate dynamics in a cobweb model where learning takes place through a selection mecanism, by which more successful firms are replicated at a higher rate. The structure of the model allows to characterize analytically the aggregate dynamics, and to compute the effect on...

This survey discusses the effect of macroeconomic fluctuations on long-run growth from both a theoretical and empirical perspective. It emphasizes the ‘opportunity cost’ approach, which states that firms will intertemporally substitute productivity-enhancing activities for regular production...