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...

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...

This paper is concerned with the impact of tax sparing provisions on the location choices of multinational enterprises. Special attention is paid to the economic in°uence of tax sparing because the OECD proposal to reconsider the inclusion of this provision in bilateral tax treaties is highly...

In this paper we show that the ability of multinational firms to manipulate transfer prices affects the tax sensitivity of foreign direct investment (FDI). We offer a model of international capital allocation where firms are heterogeneous in their ability to manipulate transfer prices. Perhaps...

This paper constructs and formally tests a general equilibrium model of long-term growth and endogenous fiscal policy. In this model policymakers find it optimal to keep the income tax rate constant over time. Tax revenues finance public consumption and public production services, with the...

Barro’s original partial equilibrium tax-smoothing model has generated a tremendous amount of empirical interest over the last several decades. However, to date, there has been no formal empirical testing of the more recent general equilibrium renditions of this model. Therefore, the purpose...

This paper analyses optimal income taxes over the business cycle under a balanced-budget restriction, for low, middle and high income agents. A model incorporating capital-skill complementarity in pro- duction and differential access to capital and labour markets is de- veloped to capture the...

We use a panel of euro area countries to assess the determinants of long-term sovereign bond yield spreads over the period 1999.01-2010.12. We find that, unlike the period preceding the global financial crisis, European government bond yield spreads are well-explained by macro- and fiscal...

This paper undertakes a normative investigation of the quantita- tive properties of optimal tax smoothing in a business cycle model with state contingent debt, capital-skill complementarity, endogenous skill formation and stochastic shocks to public consumption as well as total factor and...

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...