This paper studies optimal taxation of income and education when employers cannot observe workers' productivity and workers signal their productivity to firms by choosing both quantity and quality of education. We characterize constrained efficient allocations and derive conditions under which...

When deciding on the social desirability of public investment, the cost of a project is sometimes adjusted by a factor known as the Marginal Cost of Public Funds (MCP F ), which captures the cost of raising public funds through distortionary taxation. However, there is no scholarly consensus on...