The German Income Tax Reform 2000, which announced a reduction in income tax rates to be implemented in a series of three stages, was welcomed by the public as a step towards unleashing lurking growth potentials. Nonetheless, in the course of the year 2001 a dispute arose, centering around the...

In this paper we develop a new methodology for finding optimal government policies in economies with heterogeneous agents. The methodology is solely based on three classes of equilibrium conditions from the government's and individual agent's optimization problems: 1) the first order conditions;...

I investigate how political uncertainty influences corporate investment decisions employing a unique panel dataset of German manufacturing firms. I use data on firms' self-reported investment realizations, plans and revisions. The firm-specific user cost of capital captures the current...

This dissertation consists of six self-contained chapters that are related to the behavior of firms and politicians in a broader sense. After an introduction to the topic, the first part of the dissertation elaborates on how institutional and political framework conditions influence the behavior...

Niels Kleis Frederiksen examines the effects of the broad reductions in the labour income taxation undertaken in many industrialised countries in order to enhance labour force participation. He aims at evaluating whether these tax cuts are likely to lead to supply side adjustments which can...

We evaluate the relative importance of aggregate labor productivity versus income taxes and social contributions for tax compliance in an economy with a large degree of informality. Empirical evidence points out that tax evasion in Europe happens through partially concealing wages and profits in...

Unlike in Asia, the manufacturing sector has not (yet) become a driver of structural change in Africa. One common explanation is that the natural resource-focus of many African economies leads to Dutch disease effects. To test this argument for the case of newly found oil in Ghana we develop a...