A model is presented where workers move between two different occupations in response to economic incentives that are distorted by an income tax. Wages assume equilibrium values that are affected by the tax parameters. Incidence and welfare effects of small tax revisions are analyzed with...

This paper analyzes state-contingent taxation of the return to foreign investment in a country. It is assumed that the investment will be undertaken only if the investor obtains a given expected utility from the project. The optimal tax schedule across income levels in different states is...

A large share of public funds is spent on private goods (education, health care, day care, etc.). This paper integrates two different approaches to the analysis of public provision of private goods. While normative public economics has established an efficiency case for such provision, the...

Non-linear income taxes and linear commodity taxes are analysed when people differ with respect to ability, high-skilled agents have heterogeneous preferences, and neither individual abilities nor preferences are observable. The paper highlights how informational constraints may motivate...

The incidence and efficiency losses of taxes have usually been analysed in isolation from public expenditures. This negligence of the expenditure side may imply a serious misperception of the effects of marginal tax rates. The reason is that part of the marginal tax may in fact be payment for...