We show that more human capital improves incentives in a standard optimal taxation problem: common assumptions about preferences and technology imply that the disutility of labor decreases less strongly in unobserved ability if agents have more human capital. Human capital thus reduces the...

We study education and income tax policies in a model with endogenous selection into college. Our framework is strongly influenced by the empirical college literature and incorporates heterogenous returns and tastes for college, earnings risk (implying uncertain returns to college) and...

This paper studies optimal taxation schemes for education in a search-matching model where the labor market is divided between a high-skill and a low-skill sector. Two public policy targets - maximizing the global employment level and optimizing the social surplus - are studied according to...

This paper studies optimal taxation in a general equilibrium macro model with endogenous entry. We compare the constant elasticity of substitution (CES) model to three alternative demand structures: oligopolistic competition in prices, oligopolistic competition in quantities, and translog...

Fiscal considerations may shift governmental priorities away from environmental concerns: Finance ministers face strong demand for public expenditures such as infrastructure investments but they are constrained by international tax competition. We develop a multi-region model of tax competition...

This paper proposes a theory of commodity taxation in the presence of durable goods. Optimal commodity taxes depend on preference nonseparabilities between durable and nondurable consumption. In particular, the seminal Atkinson-Stigliz result fails and differential commodity taxes are optimal...

Value added taxes (VAT) are an important, and in many cases increasing, source of revenue in both developed and developing countries. Unsurprisingly there is an intense academic and policy debate about the appropriate VAT rate structure, for both equity and efficiency reasons. In this paper we...

We consider an economy where individuals face uninsurable risks to their human capital accumulation and study the problem of determining the optimal level of linear taxes on capital and labor income together with the optimal path of the debt level. We show both analytically and numerically that...

We analyze optimal taxation of labor and capital income in a life-cycle framework with idiosyncratic income risk. We provide a novel decomposition of labor income tax formulas into a redistribution and an insurance component. The latter is independent of the social welfare function and...

In this paper we allude to a novel role played by the non-linear income tax system in the presence of adverse selection in the labor market due to asymmetric information between workers and firms. We show that an appropriate choice of the tax schedule enables the government to affect the wage...