This article challenges the conventional result that a tighter environmental tax has no long-run effect on human capital accumulation in the presence of pollution arising from final output production. It demonstrates that the technology used in the abatement sector determines the existence and...

In a two-period overlapping generations model, this paper demonstrates that the relationship between the environmental taxation and the economic activity (level- and growth-output) becomes inverted-U shaped, when the detrimental impact of pollution on health and the private decision of each...

This paper examines the asymptotic and finite-sample properties of tests of equal forecast accuracy when the models being compared are overlapping in the sense of Vuong (1989). Two models are overlapping when the true model con- tains just a subset of variables common to the larger sets of...

In this paper, we explore the proposition that the optimal capital income tax is zero using an overlapping generations model. We prove that for a large class of preferences, the optimal capital income tax along the transition path and in steady state is non-zero. For a version of the model...

The standard New Keynesian model suffers from the so-called .macro-micro pricing conflict: in order to match the dynamics of inflation implied by macroeconomic data, the model needs to assume an average duration of price contracts which is much longer than what is observed in micro data. Here I...