We explore a political-economy model of labor subsidies, extending Meltzer and Richard's median-voter model to a dynamic setting. We explore only one source of heterogeneity: initial wealth. As a consequence, given an operative wealth effect, poorer agents work harder, and if the agent with...

Heterogeneity between unemployed and employed individuals matters for optimal fiscal policy. This paper considers the consequences of welfare heterogeneity between these two groups for the determination of optimal capital and labor income taxes in a model with matching frictions in the labor...

We study the structure of optimal wedges and wealth taxes in a Mirrleesian economy with endogenous skills. Human capital is a private state variable that drives the skill process of each individual. Building on the findings of the labor literature, we assume that human capital investment is a)...

Following the seminal work of Mirrlees (REStud, 1971), there has been a large amount of work on how to design an optimal tax system when agents' skills are private information. This literature makes a strong assumption: it assumes that the data generation process for skills in the economy is...

In this paper we argue that it might not be such a bad idea to tax capital income in the long run. We address this question in an environment in which individuals are finitely lived and face uninsurable idiosyncratic labor income risk. In choosing a tax system a benevolent planner trades off...

This paper studies the aggregate and distributional implications of Markov-perfect tax-spending policy in a neoclassical growth model with capitalists and workers. Focusing on the long run, our main …ndings are: (i) it is optimal for a benevolent government, which cares equally about its...

The paper studies the role of income taxes and admission fees in financing excludable and nonexcludable public goods in a large economy. A renegotiation proofness condition makes the multidimensional Bayesian mechanism design problem tractable. Resulting formulae for optimal income taxes and...

This paper characterizes the dynamics of Pareto efficient income taxes in a dynamic economy with human capital accumulation. I extend the tools and insights developed by Mirrlees (1971) into a dynamic framework. I follow Diamond (1998) by assuming that there are no income effects on labor...