Government expenditure on public inputs such as human capital formation and public infrastructure can significantly affect productivity. An interesting and highly relevant policy question is whether such expenditure should be financed according to the benefit-taxation principle. Focusing on...

Should provincial business taxes be deductible under a federal profit tax? We show that the "optimal deductible," which neutralizes the vertical fiscal externality between the federal and provincial government, is the change in the federal tax base per dollar of tax revenue collected by the...

Nominal price rigidity is explained in the Sheshinski-Weiss (SW) model by costly price adjustment. The predictions of the SW model, which describe a firm's optimal forward-looking price adjustment strategy, were derived and tested using microdata on the timing and the magnitude of premium...