We study a model of endogenous means testing where households differ in their income and where the in-kind transfer received by each household declines with income. Majority voting determines the two dimensions of public policy: the size of the welfare program and the means-testing rate. We...

We study the optimal auditing of a taxpayer’s income in a dynamic principal-agent model of hidden income. Taxpayers in our model initially have low income and stochastically transit to high income that is an absorbing state. A low-income taxpayer who transits to high income can underreport his...

In this paper we show that price equalization alone is not sufficient to determine the barriers to international trade. There are many barrier combinations that deliver price equalization, but each combination implies a different volume of trade. We demonstrate this first theoretically in a...