In this paper we examine how model uncertainty due to the preference for robustness (RB) affects optimal taxation and the evolution of debt in the Barro tax-smoothing model (1979). We first study how the government spending shocks are absorbed in the short run by varying taxes or through debt...

This paper investigates optimal tax policy when economic conditions are uncertain, creating risk in tax revenues. Optimal taxation with uncertainty balances costs from volatility and deadweight loss. Tax policy affects volatility through two channels; spreading risk between public and private...

This paper studies how gradualism affects the welfare gains from trade, technology, and reforms. When people face adjustment frictions, gradual shocks create less adverse distributional effects in the short run. We show that there are welfare gains from inducing a more gradual transition via...