Affluent households can respond to taxation with means that are not economically viable for the rest of the population, such as sophisticated tax plans and international tax arbitrage. This paper studies an economy in which an inequality-averse social planner faces agents who have access to a...

Afluent households can respond to taxation with means that are not economically viable for the rest of the population, such as sophisticated tax plans and international tax arbitrage. This paper studies an economy in which an inequality-averse social planner faces agents who have access to a...

We model the link between inequality, lack of political commitment, and ex-cessive risk taking. If politicians cannot commit to a long-term tax schedule, increasing returns to tax avoidance induce the middle class to take on non rewarded ?nancial risk despite risk aversion. Electoral pressure...

We model the link between inequality, lack of political commitment, and ex-cessive risk taking. If politicians cannot commit to a long-term tax schedule, increasing returns to tax avoidance induce the middle class to take on non rewarded ?nancial risk despite risk aversion. Electoral pressure...

We model the link between inequality and excessive risk taking. In the presence of increasing returns to tax avoidance, the middle class is willing to take non rewarded financial risk despite risk aversion. Electoral pressure may lead an incumbent politician to endorse this excessive risk taking...

Based on a simple framework, this note clarifies the economics behind bank restructuring and evaluates various restructuring options for systemically important banks. The note assumes that the government aims to reduce the probability of a bank’s default and keep the burden on taxpayers at a...