Americans who are caught evading taxes in one year may be audited for prior years. While the IRS does not disclose its method of selecting tax returns for audit, it is widely believed that a taxpayer's probability of being audited is an increasing function of current evasion. Under these...

The underlying economic sources of volatility clustering in asset returns remain a puzzle in financial economics. Using daily equity returns, we study variation in the volatility relation between the conditional variance of individual firm returns and yesterday's market return shock. We find a...

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Real world contracts limit the liabilities of agents by imposing constraints on their transfers or on their utilities. In an adverse selection model, Sappington (1983) has shown that the two constraints yield an equivalent problem for the principal. We show that this result does not hold in a...

This research presents a dynamic model of crime in which agents anticipate future consequences of their actions. Current period decisions affect future outcomes by a process of capital accumulation. While investigating the role of human capital, the focus of our study is on a form of capital...

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Within a framework of optimal taxation a la Mirrlees, we add a new heterogeneity between the individuals who differ not only on their marginal productivity, but also on their initial endowment in a good which is interpreted as an aggregate consumption. We consider other goods in the economy...

This paper studies the effects of agent heterogeneity on optimal capital income taxes, where taxes are collected for redistributional purposes. In a finite horizon model with an arbitrary number of heterogeneous agents, we ask what forms of taxation are optimal for different causes of inequality...

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