The first objective of this paper is to contribute to the debate regarding the desirability of the sharing of liability for the accident loss. The second objective is to extend the efficiency analysis beyond Shavell (1980, 1987) and Miceli (1997), to search for the second-best liability rules....

While acknowledging the successes of modern economics, this paper concentrates on some shortcomings. Many are traced to a single source: the great insights of economics are all qualitative. Economics does not have a theoretical structure that is tightly related to a rich body of data and those...

Unilateral second-best carbon taxes are analysed in a two-period, two-country model with international trade in final goods, oil and bonds. Acceleration of global warming resulting from a future carbon tax is large if the price elasticities of oil demand are large and that of oil supply is...

This paper models a two-period overlapping-generations economy with money populated with individuals of different skills. They face a nonlinear income tax schedule and can engage in tax evasion. Money serves two purposes: the traditional one, modeled through a money-in-the-utility-function; it...

Crucial to the analysis in this paper is the Coasian insight that external costs result from conflicting uses of scarce resources and that responsibility for these costs should not be attributed exclusively to polluters as required by the polluter pays principle (PPP). The paper argues that the...

How is the optimal level of Pigouvian taxation influenced by distributive concerns? With second-best instruments, a higher level of income redistribution calls for a lower level of Pigouvian taxation. More redistribution implies higher distortions from income taxation. Pigouvian tax revenues...

This paper uses a micro-founded DSGE model to compare second-best optimal environmental policy, and the resulting Ramsey allocation, to first-best allocation. The focus is on the source and size of uncertainty, and how this affects optimal choices and the comparison between second- and...

The quest for biorenewable energy sources is held to justify a number of government interventions, including support policies for biofuels such as those responsible for the recent rapid growth of US ethanol production. This article provides an analytical assessment of such policies. We construct...