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...

We study the dynamic taxation of capital and labor in the Ramsey model under the assumption that taxes and public good provision are decided by a self-interested politician who cannot commit to policies. We show that, as long as the discount factor of the politician is equal to or greater than...

We study optimal tax policy in a dynamic private information economy with endogenous private markets. We characterize efficient allocations and competitive equilibria. A standard assumption in the literature is that trades are observable by all agents. We show that in such an environment the...

The paper analyzes an implementation of an optimal disability insurance system as a competitive equilibrium with taxes. The problem is modeled as a dynamic mechanism design problem in which disability is unobservable. We show that an asset-tested disability system in which a disability transfer...

"We study optimal labor and savings distortions in a lifecycle model with idiosyncratic shocks. We show a tight connection between its recursive formulation and a static Mirrlees model with two goods, which allows us to derive elasticity-based expressions for the dynamic optimal distortions. We...

In this chapter we study dynamic incentive models in which risk sharing is endogenously limited by the presence of informational or enforcement frictions. We comprehensively overview one of the most important tools for the analysis such problems -- the theory of recursive contracts. Recursive...

This paper studies growth and structural transformation of the Chinese economy from 1953 to 2012 through a lens of a two-sector growth model. The main goal of the paper is to provide a systematic analysis of both the pre-1978 reform and post-1978 reform periods in a unified framework. First, we...

We develop a general method to study the effects of non-linear taxation in dynamic settings using variational arguments. We first derive general theoretical formulas that characterize the welfare effects of local tax reforms and, in particular, the optimal tax system, potentially restricted...