This paper explores the optimal income tax treatment of couples. Each couple is modelled as a single agent supplying labor along two dimensions: primary-earner and secondary-earner labor supply. We consider fully general nonlinear income tax schedules which creates a multi-dimensional screening...

We construct a microfounded, dynamic version of the IS-LM-Phillips curve model by adding two elements to the money-in-the-utility-function model of Sidrauski (1967). First, real wealth enters the utility function. The resulting Euler equation describes consumption as a decreasing function of the...

We then analyze top income and top tax rate data in 18 OECD countries. There is a strong correlation between cuts in top tax rates and increases in top 1% income shares since 1975, implyingthat the overall elasticity is large. But top income share increases have not translated into higher...

This paper analyzes optimal unemployment insurance over the business cycle in a search model in which unemployment stems from matching frictions (in booms) and job rationing (in recessions). Job rationing during recessions introduces two novel effects ignored in previous studies of optimal...

This paper presents a parsimonious equilibrium business cycle model with trade frictions in the product and labor markets. The model features unemployment and unsold production and its general equilibrium can be represented very simply: as the intersection of an aggregate supply and an aggregate...