Previous literature concludes that replacing wage taxation by taxes on a fixed factor or its rents benefits future generations. However, the effects of such steady-state gains on the transition generations have been left open. In this paper, we show that taxation of rents may also increase...

We suggest a political economy explanation for the stylized fact that intragenerationally more redistributive social security systems are smaller. Our key insight is that linking benefits to past earnings (less redistributiveness) reduces the efficiency cost of social security (due to endogenous...

In earlier literature, the suggested Pareto improvements in pay-as-you-go (PAYG) systems have relied on the presence of externalities or the possibility of intragenerational redistribution. We show that neither assumption is necessary in an economy with intergenerational trade in a fixed factor...

The paper provides an equilibrium analysis of how countries compete for migrants. The type of competition (tax or transfer competition) depends on whether the competing countries have similar policy preferences. With symmetric preferences, countries compete in taxes for migrants. With asymmetric...

Using an agency model of firm behavior, the paper analyzes whether the cost of investment should be tax exempt. The findings suggest that, when managers engage in wasteful capital expenditures, welfare may decline if the cost of investment is tax deductible, as commonly advocated. The extent to...

Previous literature widely assumes that taxes are optimized in local public finance while expenditures adjust residually. This paper endogenizes the choice of the optimization variable. In particular, it analyzes how federal policy toward local governments influences the way local governments...

The “Decentralization Theorem” (Oates, 1972) is central to the discussion of fiscal federalism. We revisit the role of consumption spillovers in evaluating the merits of (de)centralization. Unlike the general prediction, a higher degree of spillovers may reduce the difference in utility of...

This paper considers the relationship between tax competition and growth in an endogenous growth model where there are stochastic shocks to productivity, and capital taxes fund a public good which may be for final consumption or an infrastructure input. Absent stochastic shocks, decentralized...

This paper examines the efficient provision of goods in two-sided markets and characterizes optimal specific and ad-valorem taxes. We show that (i) a monopoly may have too high output compared to the social optimum; (ii) output may be reduced by imposing negative value-added taxes (subsidy) or...

Empirical evidence suggests that people dislike ads in media products like TV programs. In such situations standard economic theory prescribes that the advertising volume can be optimally reduced by levying a tax on ads. However, making use of recent advances in the theory of Industrial...