updated as a function of the labor income and the previous balance.

We analytically and quantitatively examine a prominent justifi…cation for capital income taxation: goods preferred by those with high ability ought to be taxed. We study an environment where commodity taxes are allowed to be nonlinear functions of income and consumption and …find that, when...

This paper derives novel formulas for the welfare gains of any tax reform around initial (optimal or suboptimal) dynamic tax systems. We use a perturbation-based method to express these formulas in terms of easily interpretable and empirically estimable parameters: elasticities of income and...

We study the constrained Pareto efficient allocations in a dynamic production economy in which the group that holds political power decides the allocation of resources. We show that Pareto efficient allocations take a quasi-Markovian structure and can be represented recursively as a function of...

This paper studies a Diamond-Dybvig model of providing insurance against unobservable liquidity shocks in the presence of unobservable trades. We show that competitive equilibria are inefficient. A social planner finds it beneficial to introduce a wedge between the interest rate implicit in...

We analyze an implementation of an optimal disability insurance system as a competitive equilibrium with taxes. An optimum is implemented by an asset-tested disability system in which a disability transfer is paid only if an agent has assets below a specified maximum. The logic behind this...

We provide a simple framework for comparing market allocations with government-regulated allocations. Governments can collect information about individuals' types and enforce transfers across individuals. Markets (without significant government intervention) have to rely on transactions that are...