This paper develops a model of search on the labour market with training. The model reveals how the tax system can restore the social optimum if the Hosios condition is not satisfied in the private equilibrium. Furthermore, the effects are explored of a second-best reform from average to...

This paper analyzes the design of optimal unemployment insurance in a search equilibrium framework where search eÞort among the unemployed is not perfectly observable. We examine to what extent the optimal policy involves monitoring of search effort and benefit sanctions if observed search is...

This paper considers an optimal income tax cum higher education policy. It shows that in the presence of an optimal income tax system higher education should be taxed rather than subsidized. Furthermore, income taxes should become less progressive when an optimal higher education policy is...

This paper provides an efficiency argument in favour of progressive labour income taxation. When the consumer faces a trade-off between investments in financial and human capital, a proportional comprehensive income tax tends to discriminate in favour of human capital investments. This effect is...

The standard tax theory result that investment should not be distorted is based on the assumption that profits are locally bound. In this paper we analyze the optimal tax policy when firms are internationally mobile. We show that the optimal policy response to increasing firm mobility may be...

We consider a competitive insurance market with adverse selection. Unlike the standard models, we assume that individuals receive the benefit of some type of potential government assistance that guarantees them a minimum level of wealth. For example, this assistance might be some type of...

In economies with competitive labour markets social policies harm employment and output. In Europe, in particular, non-competitive labour markets with trade unions, efficiency wages and/or costly search and mismatch seem more realistic. Social policies such as progressive taxation or...

Authors who consider efficient bargaining on the labor market predominantly focus on the Nash-bargaining solution. It seems, however, that actual labor market negotiations between an employers' federation and a labor union are often characterized by mutual concessions, which may be accounted for...

Workfare proposals concentrate on the work incentives for welfare recipients, thus focusing on the labor supply side. This paper analyzes the effects workfare has on labor demand when the labor market is unionized. As workfare reduces the number of recipients of public financial assistance, a...

This paper explores how the introduction of an experience rated system of unemployment insurance affects employment and welfare in a model where implicit contracts between firms and workers give rise to wage rigidities and unemployment. In the literature, it has been argued that experience rated...