This paper studies optimal capital and labor income taxes when the benefits of public goods are age-dependent. Provided the government can impose a consumption tax, it can attain the first-best resource allocation. This involves the uniform taxation of the cohorts' labor income and a zero...

A substantial literature examines second-best environmental policy, focusing particularly on how the Pigouvian directive that marginal taxes should equal marginal external harms needs to be modified in light of the preexisting distortion due to labor income taxation. Additional literature is...

In this paper we argue that government's allocation of resources among competing age groups has significant bearing on labor and capital supply and optimal tax policies. Empirics reveal that allocation of public expenditure is highly favorable to the old cohorts in developed countries. However,...