This working paper computes the marginal cost of public funds associated with the reform of the Spanish Personal Income Tax, in force since 1999. Departing from a partial equilibrium framework, we simulate the reform using the working population of the Spanish wave of the European Community...

It is an important difference in different measures of the marginal cost of public funds whether to take into account the "revenue effect" emphasized by Atkinson and Stern (1974). This note tries to reconcile two competing measures from a general viewpoint. We demonstrate that the revenue effect...

We analyse how vertical or horizontal fiscal equalization affects the overprovision of local public goods due to vertical fiscal externality, when there is tax evasion. The regional governments overspending incentive is examined both in case of a fiscal equalization based on pretax earned income...

This paper extends the Mirrlees (1971) model of optimal income redistribution with optimal corrective taxes to internalize consumption externalities. It is demonstrated that the optimal second-best tax on an externality-generating good should not be corrected for the marginal cost of public...

The paper focuses on the signaling value of a tax when agents are less informed than the government on the effect of their consumption. The policy making process is analyzed as a game in which the government wants to influence consumers' behaviors through tax policy, consumers being rational and...

This article examines the effects of tax evasion on the cost of goods and services in an environment where input prices are homogenously taxed but evasion is intersectorially differentiated. Tax evasion raises the relative cost of producing goods and services in the sectors where evasion is more...

We analyze how vertical or horizontal fiscal equalization affects the overprovision of local public goods due to vertical fiscal externality, when there is tax evasion. The overspending incentive of regional governments is examined in the cases of fiscal equalization based on pretax earned...

Some people have a concern for a fair distribution of incomes while others do not. Does such a concern matter for majority voting on redistribution? Fairness preferences are relevant for redistribution outcomes only if fair-minded voters are pivotal. Pivotality, in turn, depends on the structure...

Although immigration of workers generates a positive externality on members of domestic pension systems, many countries are very reluctant to allow foreigners into their labor markets. In a political economic framework, we explain this voting outcome by considering a young unskilled median voter...

In democratic societies individual attitudes of voters represent the foundations of policy making. We start by analyzing patterns in public opinion on migration and find that, across countries of different income levels, only a small minority of voters favour more open migration policies. Next...