We study optimal taxation in a dynamic Mirrlees' incentive structure where both aggregate and idiosyncratic risks are present. When aggregate shocks are i.i.d., we characterize the steady-state of our economy and prove the existence of an invariant distribution of expected utilities, which is...

In an economy which primitives are exactly those in Mirrlees (1971), we investigate the efficiency of tax schedules derived under the equal sacrifice principle. For a given exogenous government consumption level we assess whether there is an alternative tax schedule that raises more revenue...

We investigate the efficiency of equal sacrifice tax schedules in an economy which primitives are exactly those in Mirrlees (1971): a continuum of individuals with identical preferences defined over consumption and leisure who differ with respect to their labor market productivity. Using a...

We study the optimal inflation tax in an economy with heterogeneous agents subject to nonlinear taxation of labor income. We find that the Friedman rule is Pareto efficient when combined with a nondecreasing labor income tax. In addition, the optimum for a utilitarian social welfare function...

In the presence of an optimally designed unemployment bene.t system we show that it is optimal for the government to encourage human capital acquisition. The driving force of this result is the complementarity between human capital and labor-market- oriented behavior. If policy includes...

An important finding of the new dynamic public finance literature is the validity of Atkinson and Stiglitz' uniform commodity tax prescription in a dynamic Mirrleesian setting. However, this need not apply to the taxation of goods across time, i.e., the taxation of savings. We model an...

Golosov et al. (2003) have extended Atkinson and Stiglitz's uniform tax prescription to a dynamic Mirrlees' (1971) economy under the assumption that the government fully controls the agent's savings. When savings are not controlled by the government we show that the result is no longer valid:...

Using information on US domestic financial data only, we build a stochastic discount factor—SDF— and check whether it accounts for foreign markets stylized facts that escape consumption based models. By interpreting our SDF as the projection of a pricing kernel from a fully specified model...