Considering a finance constrained economy, we discuss the stabilization role of variable labour and capital income taxes under a balanced-budget rule in the presence of consumption externalities of the "keeping up with the Joneses" type. We find that sufficiently procyclical labor and/or capital...

Shifting taxes from labor income to consumption is regularly suggested as a measure to induce work incentives. We investigate the effect of increases in the Value Added Tax on labor supply and the income distribution in Germany, which is compensated by a revenue-neutral reduction in...

There is a large empirical literature on policy measures targeted at children but surprisingly very little theoretical foundation to ground the debate on the optimality of the different instruments. In the present paper, we examine the merit of targeting children through two general policies,...

We study the role and structure of commodity taxes when consumption and labor supplies are determined through a bargaining procedure between spouses, and where an optimal income tax is also available. We focus on the question whether there should be differences in tax treatment between "female"...

The public finance literature demonstrates the equivalence between consumption and labor-income (wage) taxes. We introduce an experimental paradigm in which individuals make real labor-leisure choices and spend their earned income on real goods. We use this paradigm to test whether a...

Using a collective model of consumption, we characterize optimal commodity taxes aimed at targeting specific individuals within the household. The main message is that distortionary indirect taxation can circumvent the agency problem of the household. Essentially, taxation should discourage less...

There is clear evidence that fairness plays a role in redistribution. Individuals want to compensate others for their misfortune, while they allow them to enjoy the fruits of their effort. Such fairness considerations have been introduced in political economy and optimal income tax models with a...

How does the asymmetry of labor market institutions affect the adjustment of a currency union to shocks? To answer this question, this paper sets up a dynamic currency union model with monopolistic competition and sticky prices, hiring frictions and real wage rigidities. In our analysis, we...

We analyze the optimal regional pattern of public employment in an information-constrained second-best redistribution policy showing that regionally differentiated public employment can serve as an expenditure side tagging device, bypassing or relaxing the equity-efficiency trade-off. The...

Due to ageing population and low birth rates, the European Union (EU) will need to import foreign labour in the next decades. In this context, the EU neighbouring countries (ENC) are the main countries of origin and transit of legal and illegal migration towards Europe. Their economic, cultural...