When individuals' labor and capital income are subject to uninsurable idiosyncratic risks, should capital and labor be taxed, and if so how? In a two period general equilibrium model with production, we derive a decomposition formula of the welfare effects of these taxes into insurance and...

When individuals' labor and capital income are subject to uninsurable idiosyncratic risks, should capital and labor be taxed, and if so how? In a two period general equilibrium model with production, we derive a decomposition formula of the welfare effects of these taxes into insurance and...

We develop a macroeconomic model in which liquidity plays an essential role in the production process, because _rms have a commitment problem regarding factor payments. A liquidity crisis occurs when _rms fail to obtain su_cient liquidity, and may be caused either by self-ful_lling beliefs or by...