We find that lottery tax windfalls finance higher state-government expenditures on supplemental security income that increase consumption, but only during bust periods. Wealth transfers from lottery winners to low income households enable fiscal policy to stabilize consumption during bust periods.

We introduce non-linear fiscal reaction functions with endogenously estimated state-varying thresholds to capture the behaviour of fiscal policy authorities during “good” and “bad” times. These thresholds vary with the level of debt, the economic cycle and a financial pressure index.

In the presence of distortionary taxation, the destruction of wealth–either by an act of government or an act of God–can be welfare improving, because it increases the supply of labor and therefore (holding government spending constant) allows distortionary taxes to be lowered. We show that...

In this paper we demonstrate that supplementing the optimal non-linear income tax system with a binding maximum wage rule attains a Pareto improvement, by serving to mitigate the mimicking incentives of the high-skill individuals without entailing distortions.

We reexamine the association between poverty, the middle class, and institutional outcomes using a newly developed cross-country panel dataset containing detailed information on the distribution of income and expenditure. When the size of the middle class increases (measured as the proportion of...

Consider an environment such as a political election where a principal requires the completion of multiple tasks, but an agent can only be rewarded with a hire/fire decision rather than an endogenously chosen monetary payment. When the principal hires a single agent to perform multiple tasks,...

With nondistortionary user charges, the first best and second best of a single-club-exogenous-income economy with identical individuals coincide. They differ if incomes differ. Overprovision of a superior club good then occurs in the Second Best.

We apply Leeson and Dean’s (2009) method for studying democratic dominoes to capitalist spillovers to compare the rates at which capitalism and democracy spread between countries. We find that capitalism and democracy spread at approximately the same modest rate.

We present a model in which the embezzlement of tax revenues by public officials leads the government to rely more on seigniorage to finance its expenditures. This raises inflation which depresses investment and growth via a cash-in-advance constraint.

This paper seeks to shed light on possible changes in the government debt dynamics for the first 12 euro area countries. Structural breaks are present around the global financial crisis for most countries, but not for Germany and France, the two core countries in the euro area. The properties of...