We consider the issue of steady-state optimal factor taxation in a Ramsey-type dynamic general equilibrium setting with two distinct distortions: i) taxes on capital and labour are the only available tax instruments for raising revenues, and ii) labour markets are subject to a static...

We consider the issue of steady-state optimal factor taxation in a Ramsey-type dynamic general equilibrium setting with two distinct distortions: i) taxes on capital and labour are the only available tax instruments for raising revenues, and ii) labour markets are subject to a static...

Habits are an important cause of sluggish consumption adjustment in response to price shocks. This paper studies shifts within the consumption bundle under endogenous habit formation. I put forward a model with good-specific, or "deep", habits that cause persistence in good-specific consumption....

We study implications of habit formation for optimal taxation. First, we show that taxation problems with habit formation can be analyzed using dynamic programming techniques. Second, we derive optimal labor and savings wedges for habit formation preferences. We show that habit formation...

This paper examines the implications of habit formation in private and public consumption for the Pareto-efficient provision of public goods, based on a two-period model with nonlinear taxation. If the public good supply is time-invariant, the presence of habit formation generally alters the...

We study optimal capital taxation in a dynamic Mirrleesian model with time-nonseparable preferences. The model covers the widely used cases of habit formation and durable consumption. Time-nonseparable preferences change labor supply incentives across time and thereby generate novel motives to...