It is well-known that cash-flow business taxes with full loss-offset, and their present-value equivalents, are neutral with respect to firms' investment decisions when firms are riskneutral and there are no distortions. We study the effects of cash-flow business taxation when there is bankruptcy...

This paper examines regional population distribution when there is an interregional transfer policy without commitment. We introduce explicitly the following time structure of actions. Individuals make decisions on locational choices freely ex ante, but are immobile ex post. The interregional...

Entrepreneurs starting new firms face two sorts of asymmetric information problems. Information about the quality of new investments may be private, leading to adverse selection in credit markets. And, entrepreneurs may not observe the quality of workers applying for jobs, resulting in adverse...

Politicians typically do not know what policies are best for achieving their broad objectives, so rely on bureaucrats for advice. Bureaucrats are better informed, so can manipulate outcomes by proposing policies that suit their interests. We capture this conflict of interests using a model of...

An optimal commodity tax approach is taken to compare trade taxes and VATs when some commodities are produced informally. Trade taxes apply to all imports and exports, including intermediate goods while the VAT applies only to sales by the formal sector and imports. The VAT can achieve...