This paper studies optimal dynamic tax policy under the threat of political reform. A policy will be reformed ex post if a large enough political coalition supports reform; thus, sustainable policies are those that will continue to attract enough political support in the future. We find that...

This paper discusses the data limitations associated with the measurement of top incomes and inequality in the Middle East, with special emphasis to the case of Egypt. It has been noted that high inequality might have contributed to the Arab spring revolt movement. Some studies have argued...

Does redistribution in democracies cater to the will of the majority? We propose and apply a simple empirical strategy based on survey data to address that longstanding issue. Differently from previous evaluations of the median-voter theory, ours does not assume that voters are guided by...

The role of social background for educational choices and outcomes is considered in an overlapping generations setting. It is shown that the impediments for education created by social factors are similar to a market imperfection, and publicly provided education may lead to a Pareto improvement....

There have been important studies of overall income inequality and of poverty in South Africa. In this paper, we approach the subject from a different direction: the extent and evolution of top incomes. We present estimates of the shares in total income of groups such as the top 1 per cent and...

We develop a general theoretical model of the effect of wage dispersion on team performance which nests two possibilities: wage inequality may have either negative or positive effects on team performance. A parameter which captures the marginal cost of effort, which we estimate using game-level...

Household finance - the normative and positive study of how households use financial markets to achieve their objectives - has gained a lot of attention over the past decade and has become a field with its own identity, style and agenda. In this paper we review its evolution and most recent...

A democratic society in which the distribution of wealth is unequal elects political parties which tend to represent the interests of the poor. The clientele of such governments favour unanticipated inflation taxes to erode the real value of debt service and redistribute income from the rich to...

This paper develops a simple model of international trade with intermediation. We consider an economy with two islands and two types of agents, farmers and traders. Farmers can produce two goods, but in order to sell these goods in centralized (Walrasian) markets, they need to be matched with a...

This paper presents a market equilibrium model of CEO assignment, pay and incentives under risk aversion and heterogeneous moral hazard. Each of the three outcomes can be summarized by a single closed-form equation. In assignment models without moral hazard, allocation depends only on firm size...