This paper characterizes long-run and short-run optimal fiscal policy in the labor selection framework. In a calibrated non-Ramsey decentralized equilibrium, labor market volatility is inefficient. Keeping fixed the structural parameters, the Ramsey government achieves efficient labor market...

We study fiscal devaluation in a small-open economy with labor market search frictions. Our analysis shows the key role of both dimensions in shaping the optimal tax scheme. By reducing labor market distortions, the tax reform is welfare-improving. Yet, as it makes imports more expensive, fiscal...

Whether observed differences in redistributive policies across countries are the result of differences in social preferences or efficiency constraints is an important question that paves the debate about the optimality of welfare regimes. To shed new light on this question, we estimate labor...

Incomplete information is a commitment device for time consistency problems. In the context of time consistent labor income taxation privacy can lead to a Pareto superior outcome and increases the effectiveness of public education as a second best policy

We analyze the optimal nonlinear income tax schedule when taxpayers earn multiple incomes and differ along many unobserved dimensions. We derive the necessary conditions for the government s optimum using both a tax perturbation and a mechanism design approach, and show that both methods produce...

We study the interactions between capital income tax and social security privatization in the context of rising longevity. In an economy with idiosyncratic income shocks, redistributive defined benefit social security provides some insurance against income uncertainty. This insurance comes at...

This paper revisits the standard model of labor supply under two additional assumptions: consumption requires time and some limited amount of work is enjoyable. Whereas introducing each assumption without the other one does not produce novel insights, combining them together does if the wage...

Existing tax schedules are often overly complex and characterized by discontinuities in the marginal tax burden. In this paper we propose a class of progressive smooth functions to replace personal income tax schedules. These functions depend only on three meaningful parameters, and avoid the...

This paper presents a comprehensive analysis of the role of capital taxation in advanced economies with a focus on the Swedish experience. We synthesize the existing theoretical literature, present facts about the capital stock and its distribution, review current capital tax practices and...

There is clear evidence that fairness plays a role in redistribution. Individuals want to compensate others for their misfortune, while they allow them to enjoy the fruits of their effort. Such fairness considerations have been introduced in political economy and optimal income tax models with a...