Carbon leakage is a major concern for policymakers involved with environmentalinitiatives such as the European Unions emissions trading scheme and similar cap-and-trade proposals in the United States, Australia, and elsewhere. This paperprovides a framework for understanding the drivers...

This paper examines the amount of grandfathering needed for an emissionstrading scheme (ETS) to have a neutral impact on firm profits. Weprovide a simple formula to calculate profit-neutral grandfathering in aCournot model with firms of different sizes and a general demand function.Using this...

Proposals are often made to tax goods which are environmentally damaging. Manysuch goods are consumed both directly by households and industry at large: for example,carbon-intensive fuel, waste water or congested road space. This paper adopts a tax-reformsetting to evaluate such a policy. The...

Trade unions have been successful in compressing the wage distributionbut not in influencing the share of national income going to labour. This paperclaims that a compressed wage distribution provides insurance in the same way thatthe tax and benefit system does and thus may be...

The ability to cooperate in collective action problems — such as those relating to the useof common property resources or the provision of local public goods — is a key determinant ofeconomic performance. In this paper we discuss two aspects of collective action problemsin developing...

We introduce a model of redistributive income taxation and public expenditure. Thisjoint treatment permits analyzing the interdependencies between the two policies: onecannot be chosen independently of the other. Empirical evidence reveals that partisanconfrontation essentially falls on...

A substantial literature examines second-best environmental policy, focusingparticularly on how the Pigouvian directive that marginal taxes should equalmarginal external harms needs to be modified in light of the preexistingdistortion due to labor income taxation. Additional literature is...

Recent research has demonstrated that while government expenditures are countercyclical inmost industrialized countries, they tend to be procyclical in developing countries. We develop adynamic political economy model to explain this phenomenon. In the model, public expendituresprovide insurance...

Both conventional wisdom and leading academic research view pork barrel spendingas antithetical to responsible policymaking in times of crisis. In this paper we presentan alternative view. When agents are heterogeneous in their ideology and in theirinformation about the economic situation,...

The determinants of government responsiveness to its citizens is a key issue in politicaleconomy. Here, we develop a model based on the solution of political agency problems.Having a more informed and politically active electorate strengthens incentives for governmentsto be responsive. This...