This paper studies optimal linear income taxation and redistributive social insurance when the former has the traditional labor distortion and the latter generates both ex ante and ex post moral hazard. Private insurance is available and individuals differ in labor productivity and in loss...

Despite the fact that all developed economies levy broadly-based indirect taxes alongside direct taxes, little theory is devoted to explaining the direct-indirect tax mix. Our purpose is to show that if different taxes have different evasion characteristics, some optimal tax mix emerges...

This paper analyzes optimal employment and wage policies in the public sector in a model with endogenous involuntary unemployment. A public sector is introduced into models where shirking or turnover costs are present, and optimal wage and employment policies are derived. In both models, the...

Time inconsistency of tax policy is shown to arise in a setting in which households differ in their ability to accumulate wealth and the government has redistributional objectives. The government can levy non-distorting taxes but is precluded from redistributing optimally by a self-selection...

With quasi-linear in leisure preferences, closed-form solutions for the marginal tax rates and the marginal utility of consumption under utilitarian and maxi-min objectives depend only on the skill distribution. Bunching induced by binding second-order incentive conditions also depends only on...

An overlapping generations models is constructed in which individual wealth is related to educational attainment, and in which liquidity constraints may induce children to invest in a sub-optimal level of education given their ability. Borrowing for educational attainment is obtained from within...

We study the optimal redistributive tax structure when the population can be disaggregated into tagged groups. We begin with the case in which the tag has no normative significance, but simply separates the population into identifiable groups with different distributions of ability-types. Under...

The Atkinson-Stiglitz Theorem states that if labor is weakly separable from goods in household utility functions, differential commodity taxation should not be not part of an optimal redistributive tax system. This Theorem, which is arguable the most policy-relevant result to come out of the...

The purpose of this paper is twofold. First, it extends previous models of non-cooperative private funding of pure public goods by allowing both for distortionary taxation of private goods and for subsidies based on contributions to the public goods. Second, it clarifies the type of behavioural...

Governments typically used expenditures extensively as redistributive devices. Examples include the public provision of health, education, welfare, and public pensions. The purpose of this paper is to investigate the normative rationale for such policies. In particular, we study the role of...