This paper considers the role of human capital accumulation of agents differentiated by skill type in the joint determination of social mobility and the skill premium. Our approach allows us to evaluate the dynamic e¤ects of tax reforms and education spending policies on economic e¢ ciency as...

The stylized facts suggest a negative relationship between tax progres- sivity and the skill premium from the early 1960s until the early 1990s, and a positive one thereafter. They also generally imply rising tax progressivity, except for the 1980s. In this paper, we ask whether optimal tax...

We incorporate an uncoordinated redistributive struggle for extra fiscal privileges into an otherwise standard dynamic stochastic general equilibrium model. The main aim is to get model-consistent quantitative evidence of the extent of rent seeking. Our work is motivated by the common belief...

Cross-country evidence on sub-central governments’ responses to cuts in grants received from central government shows the typical response is to adjust expenditure rather than offset cuts by raising ‘own’ revenues. Spending cuts are focused on the wage bill and, disproportionately, on...

Fiscal consolidations, episodes where governments make large discretionary improvements in their fiscal positions, have received considerable attention, especially in EMU. The existing literature demonstrates that the composition of consolidations is a crucial determinant of their success. We...

This paper studies the quantitative implications of changes in the composition of taxes for long-run growth and expected lifetime utility in the UK economy over 1970-2005. Our setup is a dynamic stochastic general equilibrium model incorporating a detailed fiscal policy structure, and whose...

This paper studies the aggregate and distributional implications of Markov-perfect tax-spending policy in a neoclassical growth model with capitalists and workers. Focusing on the long run, our main …ndings are: (i) it is optimal for a benevolent government, which cares equally about its...