This paper introduces agent heterogeneity, liquidity, and endogenous default to a DSGE framework. Our model allows for a comprehensive assessment of regulatory and monetary policy, as well as welfare analysis in the different sectors of the economy. Due to liquidity and endogenous default, the...

We show that the presence of a strategic tax policy increases the incentive for a horizontal merger compared to the situation with no tax policy. Thus, we point towards a new factor, viz., strategic tax policy, for increasing the incentive for a horizontal merger that has been ignored in the...

We develop a framework for optimal taxation when agents can earn their income both in traditional activities, where private and social products coincide, and in rent-seeking activities, where private returns exceed social returns either because they involve the capture of pre-existing rents or...

This paper surveys the literature on the implications of international capital mobility for national tax policies. Our main issue for consideration in this survey is whether taxation of income, specifically capital income will survive, how border crossing investment is taxed relative to domestic...

The 2008 financial crisis is the worst economic crisis since the Great Depression of 1929. It has been characterised by a housing bubble in a context of rapid credit expansion, high risk-taking and exacerbated financial leverage, leading to deleveraging and credit crunch when the bubble burst....

This paper bolsters Prescott’s (2004) claim that high taxes are responsible for lacklustre labor market performance in continental European countries. We develop a lifecycle model with endogenous skill formation, endogenous labor supply, and endogenous retirement. Labor taxation distorts not...

Against the background of a notoriously high macroeconomic instability and the need to raise tax revenues to meet the demands of public spending, this paper analyzes the tradeoff between growth and volatility of tax revenues in Latin America. We use a two-step Engle-Granger-type model to...

Demographic change will be one of the most challenging issues for industrialized economies in the decades to come. In this paper, we focus on the impact of demographic change on labour markets. By setting up a stylized model of a regional labour market, we are able to analyze the interaction of...

Should a redistributive government optimally subsidize education to provoke a reduction in the skill premium through general equilibrium effects on wages? To answer this question, this paper studies optimal linear and non-linear redistributive income taxes and education subsidies in two-type...

We study the subsidization of extra jobs in a general equilibrium framework. While the previous literature focuses on symmetric marginal employment subsidies where firms are rewarded when they increase employment but punished when they reduce their workforce, we consider an asymmetric scheme...