Time inconsistency of tax policy is shown to arise in a setting where households differ in their ability to accumulate wealth and where the government has redistributional objectives. It is assumed that wealth accumulation takes the form of human capital acquired through education. The...

We examine how three sources of asymmetric information affect the supply of entrepreneurs and unemployment. In the first case, banks cannot observe entrepreneurs' risk of failure so ration credit. This increases the number of entrepreneurs and the level of unemployment. In the second case, firms...