The capital income tax cuts that were part of the Jobs and Growth Tax Relief Reconciliation Act of 2003 are expiring this year and the administration has to decide whether to extend them or not. This paper assesses the effects of these tax cuts in a calibrated dynamic general equilibrium...

This paper studies a model of corporate finance in which firms use stock issuance to finance investment. Since the firm recognizes the relationship between future dividends and stock prices, future variables enter in the constraints and optimal policy is in general time inconsistent. We discuss...

Social optimization problems are often used in economics to study important issues. In a social optimization problem, the sum of individual weighted utilities is maximized over all feasible allocations that satisfy certain constraints. In this paper, we provide a mechanism that determines the...

What degree of tax autonomy should be granted to a regional government on a local tax base? Although the regional policy maker aims at maximizing social welfare, her tax policy may be distorted by the lobbying activity of local taxpayers. In this political environment we characterize the...

This paper studies a production economy with aggregate uncertainty where consumers have limited commitment on their financial liabilities. Markets are endogenously incomplete due to the fact that the borrowing constraints are determined endogenously. We first show that, if competitive financial...