This paper studies the optimal taxation of capital income in a simple model of a small open economy where domestic residents can evade taxes on their foreign investment income. The national government can only tax domestic capital income and can impose capital controls, which, however, absorb...

Standard homo economicus lives in a world of complete markets and maximizes utility which is a function of his personal consumption. This approximation cannot account for parents making transfers to adult children, children taking care of old parents, nor for gifts, inheritance and many other...