A major constraint on trade liberalization in many countries is the prospective loss of government revenue. Recent results, however, have established a simple and appealing strategy for overcoming this difficulty, whilst still realizing the efficiency gains from liberalization, in small,...

We study the efficiency of credit market equilibria when financial intermediaries cannot observe the riskiness or the returns of potential investment projects. With loan financing, there is over-instrument in high-return, high-risk projects and under-investment in low-return, low-risk projects...

A fundamental issues in designing any fiscal regime for non-renewable resources is the balance between rent taxes and royalties. This paper reviews the core issues that arise, in terms of both efficient rent extraction and correcting various market failures. Issues of asymmetric information, for...

Explains features of the U.S. tax system that may prove instructive for Britain and the EU, especially as they relate to federalism. Discusses low tax rates, absence of a VAT or national consumption tax, lack of interstate equalization, subsidization of low earnings under the earned income credit.

This paper considers what it might mean to describe the VAT as a "money machine," tests whether it is one, and asks if it might consequently be wise not to adopt it. We find broadly persuasive evidence, using panel data for the OECD, for a "weak form" of the money–machine hypothesis: that...

Like any tax, the VAT is vulnerable to evasion and fraud. But its credit and refund mechanism offers unique opportunities for abuse, and this has recently become an urgent concern in the European Union (EU). This paper describes the main forms of noncompliance distinctive to a VAT, considers how...

This paper sets out some tools for understanding the performance of the value added tax (VAT). Applying a decomposition of VAT revenues (as a share of GDP) to the universe of VATs over the last twenty years, it emerges that developments have been driven much less by changes in standard rates...

This article generalizes existing results on the effects of specific and ad valorem taxes on product quality in competitive markets. It is shown that the critical quantity on which these effects turn is the price elasticity of the marginal valuation of quality. Previous analyses, it emerges,...