This paper provides a theory of incorporation and taxation that emphasizes the role of the corporate legal form in facilitating access to external capital and the potential advantages of limited liability. Incorporation relaxes financing constraints and makes corporations larger than comparable...

This paper analyzes revenue and welfare effects of implementing a FAT both from a theoretical and a quantitative perspective. The theoretical analysis allows us to derive expressions for the revenue effects and the deadweight loss in a general equilibrium setting, which can be quantified with a...

This paper derives the optimal financial contract when a borrowing entrepreneur can evade taxes in a model of costly state verification. In contrast to previous literature on costly state verification and financial contracting, we find that standard debt contracts are not optimal when tax...

Is tax compliance driven only by extrinsic motivations such as deterrence and tax policy or is there also a role for intrinsic motivations such as morals, norms and psychology? Agents may comply based on moral sentiments, social norms, guilt and shame (Andreoni et al. 1998), all of which are...

High public debt combined with low capacities of the state to raise taxes and to support markets can put even developed countries into turmoil. However, the existing political economy literature of state capacity, pioneered by Besley and Persson (2009), does not investigate the interaction of...

This paper investigates the problem of an ``optimum population'' with respect to the age structure. Within a 3-period OLG model, with endogenous fertility and longevity, the optimal age structure, identified by number-dampened total utilitarianism, is generally failed in the laissez-faire...

In this paper, we use the estimated three-region DSGE model GEAR, which pictures Germany, the Euro Area and the Rest of the world and which is used by the Deutsche Bundesbank for policy analysis, to analyze how discretionary fiscal policy in Germany and the rest of EMU affected GDP growth and...

In 1870 Menger, Jevons and Walras succeeded in explaining prices in a market economy. While most economists welcomed their achievement, economists of the theory of public finance split in a Great Schism. The dissent is on the two Gossen Laws on which the neoclassical revolution relies....

Conventional wisdom has it that proportional representation leads to more coalition governments and so to greater government spending, especially in redistributive categories favoured by special-interest groups. In contrast, we show in a theoretical model that first-past-the-post systems of...

Trade liberalization is no Pareto-improvement - there are winners (high-skilled) and losers (low-skilled). To compensate the losers the government is assumed to introduce unemployment benefits (UB). These benefits are financed by either a wage tax, a payroll tax, or a profit tax. Using a...