This paper explores the qualitative and quantitative implications of optimal tax- ation in a developing economy when economic growth is endogenously determined. We di¤erentiate this class of economies from a developed economy in two aspects: 1. the informal sector is quantitatively signi…cant...

This paper shows, first, that non-commodity revenues are more volatile in oil- and mineral-rich countries and that quality of institutions is associated with lower volatility. We investigate the channels through which oil and mineral revenue volatility lead to non-commodity revenues volatility,...

Where the state evolves according to a discrete-state Markov chain, we sustain Lucas and Stokey's debt structure dynamics by having it emerge sequentially as the unique outcome of a sequence of choices made by two sequences of independent government departments. Each period a tax authority sets...

Household-specific growth rates of the tax base imply that the timing of tax collections determines the distribution of tax burdens and wealth across households. Changes in fiscal policy do not only shift tax burdens across generations, but also within cohorts. Institutional deficit constraints...

The paper analyzes optimal fiscal policy in an overlapping generations model with two-period lived households. The government must choose tax rates and borrowing to finance an exogenous stream of expenditures. It cannot commit to future policies, so announced policies that are not time...

This paper studies the aggregate and distributional implications of Markov-perfect tax-spending policy in a neoclassical growth model with capitalists and workers. Focusing on the long run, our main findings are: (i) it is optimal for a benevolent government, which cares equally about its...

This paper evaluates the trade-off between growth and welfare maximization from two perspectives. Firstly, it synthesizes and extends endogenous growth models with public finance to compare growth and welfare maximizing tax rates. Secondly, it examines the distinct model outcomes in terms of...

Heterogeneity between unemployed and employed individuals matters for optimal fiscal policy. This paper considers the consequences of such heterogeneity for the determination of optimal capital and income taxes in a model with matching frictions in the labor market. In line with a recent finding...