We study the consequences of a large-scale austerity program targeting financially-constrained municipalities in Germany. For identification, we exploit the quasi-random assignment of treatment among equally-distressed municipalities using a difference-in-differences design. The policy helped...

In this paper, we analyze whether the complexity of tax bills affects financial markets. Based on the Flesch-Kincaid grade level of the 32 tax bills identified by Romer and Romer (2010) in the period 1962–2003, we assess the relationship between tax bills' complexity and financial markets...

This paper examines the impact of labour market and product market reforms on income inequality for 25 OECD countries, using the local projections approach and updates of the reform indicators put together by Duval et al. (2018) until 2020. Our results suggest that both types of (endogenized)...

This paper investigates the impact of banking prudential regulation on sovereign risk. We show that prudential regulation reduces sovereign risk and induces governments to spend more. As a result, countries with tight prudential regulation have lower primary budget balances and accumulate more...

We present a theory linking political and social trust to explain trust erosion in modern societies. Individuals disagree on the seriousness of an externality problem, which leads to diverging policy opinions on how to solve it. This heterogeneity has two important effects on trust. First,...

We develop an endogenous growth model to quantify how permanent structural policy changes that enhance the fiscal policy mix, markets' functioning, and public institutions' quality affect long-term growth and welfare. The reforms include increased public investment, reduced market power through...

Estimated labor supply functions are important tools when designing an optimal income tax or calculating the effect of tax reforms. It is therefore of large importance to use estimation methods that give reliable results and to know their properties. In this paper Monte Carlo simulations are...

Keynes' General Theory (1936) is arguably one of the most important books of the twentieth century. His ideas for stabilizing the aggregate economy have profoundly influenced economic theory as well as popular opinion about what governments can and should do with respect to the business cycle....

This paper examines the implications of Artificial Intelligence (AI) and automation for the taxation of labor and capital in advanced economies. It synthesizes empirical evidence on worker displacement, productivity, and income inequality, as well as theoretical frameworks for optimal taxation....

This paper explores whether professional macroeconomic forecasters manipulate their forecasts to influence voting outcomes. We model a referendum in which a voter chooses between two policies. The voter relies on a forecaster to learn about the macroeconomic consequences of the policies. The...