The Netherlands has a unique tradition in which all major Dutch political parties provide CPB Netherlands Bureau for Economic Policy Analysis with highly detailed proposals for the tax-benefit system in every national election. This information allows us to quantitatively measure the...

This paper analyses the national tax treatment of interestexpenditures of multinational enterprises in a non-cooperative world. It is shown that the international tax systemgenerally leads to distortions in the capitaldecisions of multinational firms. In contrast to the existingliterature on the...

We argue that promoting education may be a means to reduceincome inequality. When workers of different skill levels areimperfect substitutes in production, an increase in the level ofhuman capital in the economy reduces the return to education.Hence, a given compression of after-tax incomes can...

This paper extends the Diamond (1980) model with labor unions to study optimal income taxation and to analyze whether unions can be desirable for income redistribution. Unions bargain with firms over wages in each sector and firms unilaterally determine employment. Unions raise the efficiency...

There is increasing empirical evidence that people systematically differ in their rates of return on capital. We derive optimal non-linear taxes on labor and capital income in the presence of such return heterogeneity. We allow for two distinct reasons why returns are heterogeneous: because...

This paper studies the implications of monopsony power for optimal income taxation and welfare. Firms observe workers' abilities while the government does not and monopsony power determines what share of the labor market surplus is translated into profits. Monopsony power increases the tax...

This paper studies optimal income taxation in an environment where matching frictions generate a trade-off for workers between high wages and low unemployment risk. A higher marginal tax rate shifts the trade-off in favor of low unemployment risk, whereas a higher tax burden or unemployment...

In a Mirrleesian environment, a monopsonist sets hourly wages and individuals choose how many hours to work. Labor market outcomes do not only depend on the level and slope of the income tax function, but also on its curvature. A more concave tax schedule raises the elasticity of labor supply,...

This paper analyses optimal corrective taxation and optimal income redistribution. Under general utility functions, the Pigouvian pollution tax is higher if pollution damages disproportionally hurt the poor due to equity weighting of pollution damages. Moreover, optimal pollution taxes should be...

The paper presents a polycentric general equilibrium model with congestion externalities and distortionary labor taxation calibrated to fit the key empirical regularities of the regional economy and transport system of Randstad conglomeration. In line with more stylized models, marginal external...