The Ramsey approach to optimal taxation and Ramsey tax rules have amassed substance in economic theory. However, they are often criticized on grounds of practicality, fairness, feasibility and some other aspects of designing actual tax policy. This paper presents a collection of these views; it...

We study fiscal devaluation in a small-open economy with labor market search frictions. Our analysis shows the key role of both dimensions in shaping the optimal tax scheme. By reducing labor market distortions, the tax reform is welfare-improving. Yet, as it makes imports more expensive, fiscal...

The analysis provides a new explanation for two widespread problems concerning European unemployment policy: the disappointingly small effect of many past reform measures on unemployment, and the political difficulties in implementing more extensive reform programs. We argue that the heart of...

Heterogeneity between unemployed and employed individuals matters for optimal fiscal policy. This paper considers the consequences of welfare heterogeneity between these two groups for the determination of optimal capital and labor income taxes in a model with matching frictions in the labor...

We study the structure of optimal wedges and wealth taxes in a Mirrleesian economy with endogenous skills. Human capital is a private state variable that drives the skill process of each individual. Building on the findings of the labor literature, we assume that human capital investment is a)...

Following the seminal work of Mirrlees (REStud, 1971), there has been a large amount of work on how to design an optimal tax system when agents' skills are private information. This literature makes a strong assumption: it assumes that the data generation process for skills in the economy is...

We explore a political-economy model of labor subsidies, extending Meltzer and Richard's median-voter model to a dynamic setting. We explore only one source of heterogeneity: initial wealth. As a consequence, given an operative wealth effect, poorer agents work harder, and if the agent with...

In this paper we argue that it might not be such a bad idea to tax capital income in the long run. We address this question in an environment in which individuals are finitely lived and face uninsurable idiosyncratic labor income risk. In choosing a tax system a benevolent planner trades off...

Robust GDP growth, declining unemployment, low and stable inflation, and a string of fiscal and current account surpluses -- it's a record to be envied. These outcomes in Canada owe much to sound macroeconomic policies, as well as to a favorable external environment. This book focuses on these...