A standard result in the optimal taxation literature is that, when agents differ in market ability and the government aims at redistributing from high- to low-skilled agents by means of an optimal nonlinear labor income tax and a set of commodity taxes, an optimally designed commodity tax...

We present a model of elections in which interest group donations allow candidates to shift policy positions. We show that if donations were prohibited, then a unique equilibrium regarding the platform choices of candidates would exist. Our game with financing of political campaigns exhibits two...

In this paper we examine the potential of democratic constitutions for the provision of divisible public goods in a large economy. Our main insights are as follows: When aggregate shocks are absent, the combination of the following rules yields first-best allocations: a supermajority rule, equal...

Previous literature has shown that public provision of private goods can be a welfare-enhancing device in second-best settings where governments pursue redistributive goals. However, three issues have so far been neglected. First, the case for supplementing an optimal nonlinear income tax with...

We propose a formal concept of the power of voice in the context of a simple model where individuals form groups and trade in competitive markets. Individuals use outside options in two different ways. Actual outside options reflect the possibility to exit or to join other existing groups....