This paper analyzes the efficiency of risk-taking decisions in an economy that is prone to systemic risk, captured by financial amplification effects that occur in response to strong adverse shocks. It shows that decentralized agents who have unconstrained access to a complete set of Arrow...

We analyze a model in which firms are able to acquire information about product risks and may or may not be required to disclose this information. We initially study the effect of disclosure rules assuming that firms are not liable for the harm caused by their products. Although mandatory...

A tax on vehicle emissions can efficiently induce all of the cheapest forms of abatement. Consumers could drive less, buy a smaller car with better gas mileage, use cleaner gasoline, and repair pollution control equipment (PCE). However, the technology is not yet available to measure and tax...

Most studies of the optimal provision of public goods or the excess burden from taxation assume that individual utility is independent of other individuals' consumption. This paper investigates public good provision and excess burden in a model that allows for interdependence in consumption in...

This article reviews the current state of research on education externalities. It finds that much of the confusion regarding their magnitude results from conceptual misunderstandings about their nature. The concepts of 'education', 'teaching', and 'knowledge' need to be distinguished for a...

This paper addresses transboundary environmental problems in the context of an optimal tax problem, when part of the labor force is mobile across countries. The policy instruments include both commodity taxation and nonlinear income taxation. We show how the tax policy in a noncooperative...

We present a non-cooperative model of a family’s time allocation between work and a home-produced public good, and examine whether the income tax should apply to couples or individuals. While tax-induced labor supply distortions lead to overprovision of the public good, spouses’ failure to...

This paper shows how the optimal level of Pigouvian taxation is influenced by distributive concerns. With second-best instruments, a higher level of income redistribution calls for a lower level of Pigouvian taxation. More redistributionimplies that tax collection via the income tax creates...

The paper reviews the role of taxation in controlling transport externalities. It argues that the design of transport taxes should take into account pre-existing tax distortions in the economy and looks at the implications of restrictions on the transport instruments at the disposal of the...

Housing markets and their cycles are central to understanding macroeconomic fl uctuations. As housing is an inherently spatial market, an understanding of the economics of location-specific amenities is needed. This paper examines this topic, using a rich dataset of 25 primary location-specific...