The public finance literature demonstrates the equivalence between consumption and labor income (wage) taxes. We construct an environment in which individuals make real labor-leisure choices and spend their earned income on real goods. We use this experimental framework to test whether a labor...

Atkinson and Stiglitz show that with weakly separability, differential commodity taxes are unnecessary given an optimal nonlinear income tax. Deaton showed that with an optimal linear progressive income tax, commodity taxes are superfluous under weakly separable and linear Engel curves. Using...

This paper analyzes optimal linear commodity taxes joint with non-linear income taxes. We provide optimal tax rules based on empirically observable elasticities. We demonstrate that commodities should be taxed/subsidized if doing so boosts labor supply. The critical role of commodity taxation is...

Experimental and behavioral economics are well established branches in the economic science. This essay presents and discusses some results and behavioral regularities from these fields which are of potential importance for public policy. After a brief introduction of what experimental and...

Experimental and behavioral economics are well established branches in the economic science. This essay presents and discusses some results and behavioral regularities from these fields which are of potential importance for public policy. After a brief introduction of what experimental and...

We study experimentally the protection of property in five widely distinct countries - Austria, Mexico, Mongolia, South Korea and the United States. Our main results are that the security of property varies with experimental institutions, and that our subject pools exhibit significantly...

We study the optimal tax system in a dynamic model where differences in wages induce differences in inheritances, and the transition from parent ability to child ability is described by a Markov chain. We characterize expected inheritances in the steady state and show that the Atkinson-Stiglitz...

This paper explores the long-run impacts of tax policy in a two-country model of endogenous growth with variable labor supply. We focus on international spillover effects of tax reforms under alternative trade structures. It is shown that if the instantaneous utility function of the...

We show in a two-period world with endogenous savings and two assets, one of them exhibiting a stochastic return, that an interest-adjusted income tax is optimal. This tax leaves a riskless component of interest income tax free and taxes the excess return with a special tax rate. There is no...

This article studies the equivalence between labor and consumption taxes in a stochastic context, where the government can undertake an active portfolio management strategy by investing in both risk-free and risky assets. Using a two-period model we show that such taxes let consumers make the...