We study the long run optimal redistributive tax structure on capital and labor in a dynamic model with heterogeneous labor productivities and skill biased technology. Assuming that the planner's actions are restricted by a log-linear (progressive) tax and transfer function of pre-tax labor...

As a response to a changing labour market scenario and to the concerns for increasing costs and bad incentives of traditional income support policies, the last decades have witnessed, in many countries, reforms introducing more sophisticated designs of means-testing, eligibility and tagging. In...

We develop a model of human capital formation with endogenous labor supply and heterogeneous agents to explore the optimal level of education subsidies along with the optimal schedule of the labor income tax. If the government can observe inputs into the production of human capital, subsidies on...

What are the implications of imperfect competition in labor markets for optimal labor income taxes? I study this question in an Aiyagari (1994) incomplete-market economy with idiosyncratic risk, borrowing constraints, and the new feature that jobs are differentiated from workers' perspective and...

A kind of folk theorem in tax policy states that too much uncertainty about the impact of taxing (or subsidizing) a particular taxable attribute is cause for excluding that attribute from the tax base. I extend the optimal tax model to test this hypothesis. In my model, the government is not...

Emissions regulations like carbon pricing raise the price of covered sector goods and thus can interact with and exacerbate other preexisting distortions in the economy. One such distortion is labor taxes. Another is emissions "leakage" due to the lack of comparable emissions pricing abroad or...

The optimal income tax model under the threat of migration is extended to include both indirect taxes and public goods. This has enabled us to check that: 1) optimal income tax rates are higher than in the absence of indirect taxes and, at the top of the skills distribution, may be positive; 2)...

Lucas and Stokey (1983) motivated future governments to confirm an optimal tax plan by rescheduling government debt appropriately. Debortoli et al. (2021) showed that sometimes that does not work. We show how a Ramsey plan can always be implemented by adding instantaneous debt to Lucas and...

This paper analyzes optimal linear taxes on capital and labor incomes in a life-cyclemodel of human capital investment, financial savings, and labor supply with heteroge-nous individuals. A dual income tax with a positive marginal tax rate on not onlylabor income but also capital income is...