We conduct a welfare analysis of redistributive labor taxation in a tractable heterogeneous-agents economy. We highlight four key considerations that determine the optimal overall progressivity of the tax schedule: (i) the preference weight on public consumption goods, (ii) the variance of...

Search theory routinely assumes that decisions about acceptance/rejection of job offers (hence, about labor market movements between jobs or across employment states) are made by individuals acting in isolation. In reality, the vast majority of workers are somewhat tied to their partners into...

(they are crowded out). Thus the subsidy strongly acts on the composition of those in education. We find that subsidies made conditional on financial resources are generally preferable to those conditional on ability and large equilibrium effects can be induced by relatively small changes in...