This paper develops a dynamic two-country neoclassical stochastic growth model with incomplete markets. Short-term credit flows can be excessive and reverse suddenly. The equilibrium outcome is constrained inefficient due to pecuniary externalities. First, an undercapitalized country borrows too...

Conditions of secular stagnation - low interest rates, below target inflation, and sluggish output growth - now characterize much of the global economy. We consider a simple two-country textbook model to examine how capital markets transmit secular stagnation and to study policy externalities...

We formulate a two-country model with monopolistic competition and heterogeneous firms to reconsider labor market linkages in open economies. Labor-market imperfections arise by virtue of country-specific real minimum wages. Two principal experiments are considered. First, we show that trade...

Even though financial markets today show a high degree of integration, the world capital market is still far from the textbook story of high capital mobility. The failure to have a tax scheme in which the rate of returns across countries are equated can result in inefficient capital flows across...

This paper uses a panel of individual tax returns and the `bracket creep' as source of tax rate variation to construct instrumental variables estimates of the sensitivity of income to changes in tax rates. From 1979 to 1981, the US income tax schedule was fixed in nominal terms while inflation...

We examine how tax avoidance in the form of trade in well-functioning asset markets affects the basic labor supply model. We argue that models that integrate tax arbitrage and labor supply decisions may shed light on a number of positive and normative questions concerning modern systems of...

We examine the effect of the 1996 Tax Reform Act on the labor supply of affluent men. The Act reduced marginal tax rates for the affluent more than for other taxpayers. Using instrumental-variables methods with a variety of identifying variables, we find essentially no responsiveness of the...

This paper generalizes the standard model of how taxes affect the labor-leisure choice by allowing individuals to change both their labor supply and avoidance effort in response to tax changes. Doing so reveals that both the income and substitution effect of taxes depend on both preferences and...

This paper considers both theoretical quest ions and empirical measures of the effects of various policies of income and payroll taxation on labor supply. It emphasizes deadweight loss as the correct criterion of taxation evaluation, rather than merely output effects. Distributional issues are...