A planner sets a lump sum transfer and a linear tax on labor income in an economy with incomplete markets, heterogeneous agents, and aggregate shocks. The planner's concerns about redistribution impart a welfare cost to fluctuating transfers. The distribution of net asset holdings across agents...

I study risk sharing arrangements in settings characterized with Knightian uncertainty. In general both the demand for insurance and risk perceptions are endogenous and interact in these settings. This paper attempts to identify the key mechanisms affecting insurance in stylized environments...

intertemporal distortions.

We characterize an environment in which agents have private information and trade in decentralized markets. First, we show that all the useful information is learned in the long run. Second, we show that agents with private information receive rents, and the value of information is positive....

This paper studies dynamic non-linear taxation in a two-period model without government commitment and a continuum of agents with privately known skill parameters, which are constant overtime. The government is utilitarian but cannot commit at t=1 to the tax scheme that she will propose at t=2....

updated as a function of the labor income and the previous balance.

We analytically and quantitatively examine a prominent justifi…cation for capital income taxation: goods preferred by those with high ability ought to be taxed. We study an environment where commodity taxes are allowed to be nonlinear functions of income and consumption and …find that, when...

This paper derives novel formulas for the welfare gains of any tax reform around initial (optimal or suboptimal) dynamic tax systems. We use a perturbation-based method to express these formulas in terms of easily interpretable and empirically estimable parameters: elasticities of income and...

We study the problem of optimal social insurance when agents are privately informed and the government cannot commit to a particular allocation. Contrary to the previous literature, we assume that agents' types have some persistence. We show that under some conditions it is optimal for the...

Third, there is no general way to Pareto rank the equlibria.