We analyze whether education subsidies to students in poor areas are an effective tool of regional policy. We show that this policy can miss its objectives and actually hurt instead of help the recipient area. The reason is that geographical mobility increases with the personal skill level....

We investigate the optimal nonlinear wage and interest-income taxes with money as an asset, assuming that there are two types of labor, which are not perfect substitutes in production, and that each type is difficult for the policymaker to observe. It is shown that the optimal interest-income...

Alternative ways to organize government subsidies to unemployment insurance (UI) are analyzed in a right-to-manage model where industry-level unions run UI funds of their own. It is shown that equilibrium unemployment is decreasing in the share of UI financed by the employed union members. A...

It is assumed that education simultaneously affects growth and wage inequality. Human capital is taken as lumpy, and education policy has a direct bearing on growth, the number of high-skilled people, and wages. It is shown that the optimal policy for the unskilled is Rawlsian and implies high...

The paper summarizes the arguments in favor of a shift from comprehensive to dual income taxation and complements the discussion by an overview of tax reforms, which reveals the characteristic features of a dual income tax system. The scope of our analysis is not restricted to the Nordic...

Many countries do not require all taxpayers to file an annual income tax return. Return-free systems shift some of the costs of operating the tax system from taxpayers to employers, other third parties, and the government. Return-free systems may work best when the tax system is simple: When the...

There are good arguments for an individual income tax on potential income, but a drawback to such a tax is the significant administrative concern regardingits implementation. This paper argues that human-capital theory provides a widely accepted and straightforward method to estimate potential...

Deterrence can boost compliance with tax authorities or undermine it depending on whether taxpayers cope with the threat of taxation through thinking morally, or feeling oppressed, or taking control of the tax they pay. When feeling oppressed dominates thinking morally in response to deterrence,...

This paper analyzes the relationship between aid and domestic tax revenues using a more recent and comprehensive data set covering 118 countries for the period 1980-2009. Overall, our results support earlier findings of a negative association between net official development assistance (ODA) and...

We discuss the strengths and weaknesses of the fiscal consolidation package adopted by Italy in 2011. Estimated at 3.3% of GDP, the tax measures were introduced to reduce public deficits without weakening the prospects of economic recovery or producing adverse redistributive outcomes. The tax...