This paper explores how the costs of meeting given aggregate targets for pollution emissions change with the imposition of the requirement that key pollution-related industries be compensated for potential losses of profit from the pollution regulation. Using analytically and numerically solved...

This paper explores the optimal risk sharing arrangement between generations in an overlapping generations model with endogenous growth. We allow for nonseparable preferences, paying particular attention to the risk aversion of the old as well as overall 'life-cycle' risk aversion. We provide a...

Many pollution-related industries wield strong political influence and can effectively veto policy initiatives that would harm their profits. A politically realistic approach to environmental policy therefore seems to require the alleviation of significant profitlosses to these industries. The...

This paper employs analytical and numerical general equilibrium models to examine the optimal setting of environmental taxes in the presence of pre-existing distortionary taxes. Both models indicate, contrary to what several analysts have suggested, that the optimal environmental tax rate in...

This paper deals with the so-called "double dividend" of an environmental tax reform. Using a model with only labor and polluting inputs as factors of production, we find that society faces a trade-off between internalizing environmental externalities and raising revenues in the least...

The evidence on international capital immobility is extensive, including the lack of international portfolio diversification, real interest differentials across countries, and the high correlation between domestic savings and investment. We develop a model with asymmetric information between...

A politically realistic approach to environmental policy seems to require avoiding significant profit-losses in major pollution-related industries. The government can avoid such losses by freely allocating some emissions permits or by exempting some inframarginal emissions from a pollution tax....

We develop a model of human capital formation with endogenous labor supply and heterogeneous agents to explore the optimal level of education subsidies along with the optimal schedule of the labor income tax. If the government can observe inputs into the production of human capital, subsidies on...

This paper analyzes optimal linear taxes on capital and labor incomes in a life-cycle model of human capital investment, financial savings, and labor supply with heterogenous individuals. A dual income tax with a positive marginal tax rate on not only labor income but also capital income is...

This paper explores how fiscal and monetary policy interact if commitment and access to lump-sum taxation are limited. We analyze how equilibrium outcomes for inflation, employment, and public spending are affected by the structural features of an economy, such as money holdings, outstanding...