We consider social insurance schemes with a two-part benefit formula: a flat (constant) term and a variable term which is proportional to individuals' contributions. The factor of proportionality defines the type of social insurance. We adopt a two-stage political economy approach. At the first,...

This paper studies the optimal direct/indirect tax mix in a setting where individuals differ in several unobservable characteristics (productivity and endowments). Tax instruments (income and commodity taxes) are constrained solely by the information structure.

The European Union consists of a wide variety of welfare states with social insurance schemes ranging from those providing earnings related benefits (Bismarckian)to flat rate benefits (Beveridgean)systems. The conventional wisdom is that with factor mobility poor people have incentives to move...

This paper studies the role of family size in the design of optimal income taxation. We consider a second best setting where the government observes the number of children and the income of the parents but not their productivity.