Entrepreneurs starting new firms face two sorts of asymmetric information problems. Information about the quality of new investments may be private, leading to adverse selection in credit markets. And, entrepreneurs may not observe the quality of workers applying for jobs, resulting in adverse...

Politicians typically do not know what policies are best for achieving their broad objectives, so rely on bureaucrats for advice. Bureaucrats are better informed, so can manipulate outcomes by proposing policies that suit their interests. We capture this conflict of interests using a model of...

We study optimal nonlinear income taxation when earnings can differ because of both ability and luck, so the income tax has both a redistributive role and an insurance role. A substantial literature on optimal redistribution in the absence of uncertainty has evolved since Mirrlees' original...

An optimal commodity tax approach is taken to compare trade taxes and VATs when some commodities are produced informally. Trade taxes apply to all imports and exports, including intermediate goods while the VAT applies only to sales by the formal sector and imports. The VAT can achieve...

Despite the fact that all developed economies levy broadly-based indirect taxes alongside direct taxes, little theory is devoted to explaining the direct-indirect tax mix. Our purpose is to show that if different taxes have different evasion characteristics, some optimal tax mix emerges...

Time inconsistency of tax policy is shown to arise in a setting in which households differ in their ability to accumulate wealth and the government has redistributional objectives. The government can levy non-distorting taxes but is precluded from redistributing optimally by a self-selection...

With quasi-linear in leisure preferences, closed-form solutions for the marginal tax rates and the marginal utility of consumption under utilitarian and maxi-min objectives depend only on the skill distribution. Bunching induced by binding second-order incentive conditions also depends only on...

This paper studies optimal linear income taxation and redistributive social insurance when the former has the traditional labor distortion and the latter generates both ex ante and ex post moral hazard. Private insurance is available and individuals differ in labor productivity and in loss...

Actual inheritances are an hybrid of canonical types of bequests and in particular of accidental bequests and altruistic bequests. In this paper, bequeathed estate consists of two components: an amount intended by altruistic parents and an amount which results from the premature death of...

This paper examines regional population distribution when there is an interregional transfer policy without commitment. We introduce explicitly the following time structure of actions. Individuals make decisions on locational choices freely ex ante, but are immobile ex post. The interregional...