Why is it optimal not to tax capital income in the long-run in Chamley (1986) and Judd (1985)? This paper demonstrates that the answer follows standard intuitions from the commodity tax literature. In the steady state, Engel curves for consumption are linear in labour earnings, irrespective of...

Why is it optimal not to tax capital income in the long-run in Chamley (1986) and Judd (1985)? This paper demonstrates that the answer follows standard intuitions from the commodity tax literature. In the steady state, Engel curves for consumption are linear in labour earnings, irrespective of...

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...

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...

This paper analyzes optimal linear taxes on capital and labor incomes in a life-cyclemodel of human capital investment, financial savings, and labor supply with heteroge-nous individuals. A dual income tax with a positive marginal tax rate on not onlylabor income but also capital income is...

A flat tax rate on income has gained popularity in European countries. This paper assesses the attractiveness of such a flat tax in achieving redistributive objectives with the least cost to labour market performance. We do so by using a detailed applied general equilibrium model for the...

We develop models of optimal linear and non-linear income taxation with endogenous human capital formation to explore optimal education subsidies. Optimal subsidies on education ensure efficiency in human capital accumulation and thus play an important role in alleviating the tax distortions on...

Why is it optimal not to tax capital income in the long-run in Chamley (1986) and Judd (1985)? This paper demonstrates that the answer follows standard intuitions from the commodity tax literature. In the steady state, Engel curves for consumption are linear in labour earnings, irrespective of...

This paper extends the standard human capital model with real options. Real options influence investment behavior when risky investments in human capital are irreversible and individuals can affect the timing of the investment. Option values make individuals more reluctant to invest in human...

Should a redistributive government optimally subsidize education to provoke a reduction in the skill premium through general equilibrium effects on wages? To answer this question, this paper studies optimal linear and non-linear redistributive income taxes and education subsidies in two-type...