This article analyzes profit taxation according to the arm's length principle in a new model where heterogeneous firms sort into foreign outsourcing. We show that multinational firms are able to shift profits abroad even if they fully comply with the tax code. This is because, in equilibrium,...

We study the optimal combination of corporate tax rate and tax base in a model of a small open economy with heterogeneous firms. We show that it is optimal for the small country's government to e®ectively subsidize capital inputs by granting a tax allowance in excess of the true costs of...

This article analyzes profit taxation according to the arm's length principle in a new model where heterogeneous firms sort into foreign outsourcing. We show that multinational firms are able to shift profits abroad even if they fully comply with the tax code. This is because, in equilibrium,...

We analyze the welfare and employment effects of different wage bargaining regimes. Within the large firm search model, we show that collective bargaining affects employment via two channels. Collective bargaining exerts opposing effects on job creation and wage setting. Firms have a stronger...

In the hold-up problem incomplete contracts cause the proceeds of relation specific investments to be allocated by ex-post bargaining. The present paper investigates the efficiency of incomplete contracts if individuals have heterogeneous preferences implying heterogeneous bargaining behavior...

While most market transactions are subject to strong incentives, transactions within firms are often not incentivized. We offer an explanation for this observation based on envy among agents in an otherwise standard moral hazard model with multiple agents. Envious agents suffer if other agents...

This paper considers a firm whose potential employees have private information on both their productivity and the extent of their fairness concerns. Fairness is modelled as inequity aversion, where fair-minded workers suffer if their colleagues get more income net of production costs. Screening...

Partnerships are the prevalent organizational form in many industries. Most partnerships share profits equally among the partners. Following Kandel and Lazear (1992) it is often argued that ``peer pressure'' mitigates the arising free-rider problem. This line of reasoning takes the equal sharing...

This paper analyzes the welfare effects of a public smoking ban in bars. We construct a model that captures crucial features of bar life: competing bars, social interaction, and heterogenous preferences for a smoking ban. Smokers and non-smokers simultaneously choose a bar given their...

A continuous-time sequential job search model with savings and CARA preferences is solved analytically without resorting to unlimited borrowing and real-valued consumption. I isolate the effects of limited borrowing and nonnegative consumption as well as risk-aversion on the reservation wage by...