The opacity of over-the-counter (OTC) markets, in which a large number of financial products including credit derivatives trade, appears to have played a central role in the nancial crisis in 2007-09. We model such opacity of OTC markets in a general equilibrium setup where agents share risks,...

We consider an economy where individuals face uninsurable risks to their human capital accumulation, and study the problem of determining the optimal level of linear taxes on capital and labor income together with the optimal path of the debt level. We show both analytically and numerically that...

When individuals' labor and capital income are subject to uninsurable idiosyncratic risks, should capital and labor be taxed, and if so how? In a two period general equilibrium model with production, we derive a decomposition formula of the welfare e ects of these taxes into insurance and...

How should capital and labor be taxed when individuals' labor income is subject to uninsurable idiosyncratic risks? To address this question, we develop a tractable infinite horizon model with incomplete markets and consider a dynamic optimal taxation problem with linear taxes on the wage and...