This paper re-examines the issues involved in the design of a direct tax on consumption, an idea that has received a fair degree of acceptance in the transition countries over the past decade (e.g., tax reforms in Croatia and Moldova). First we argue that on the subject of equivalence among a...

The importance of capital loss offset provisions in a world of risk is well documented in the tax literature. However, the potential deadweight losses owing to imperfect offset has not been fully explored. This paper develops a framework whereby that investigation can be carried out and utilizes...

It is well recognised that the issue of the social rate of discount applies only to the gains from public investment that accrues to the public sector. When it comes to measurement, however, there is a problem: public investment in infrastructure and the like do not usually yield direct...

In this paper we analyze the two-period consumption-investment decision of a household with prospect theory preferences and an endogenous second period reference level which captures habit persistence in consumption and in the current consumption reference level. In particular, we examine three...

In this paper we examine capital income taxation of a reference dependent sufficiently loss averse investor in a two period portfolio choice model under full loss offset provisions. Capital income taxation with loss offset provisions has been found to stimulate risk taking in expected utility...

This study extends the literature on portfolio choice under prospect theory preferences by introducing a two-period life cycle model, where the household decides on optimal consumption and investment in a portfolio with one risk-free and one risky asset. The optimal solution depends primarily on...

This research note examines the conditions which will induce a prospect theory type investor, whose reference level is set by 'playing it safe', to invest in a risky asset. The conditions indicate that this type of investor requires a large equity premium to invest in risky assets. However, once...

This research examines capital income taxation for a loss averse investor under some acceptable in the literature reference levels relative to which are the changes in the level of wealth valued. Depending on the reference level, some results indicate that it could be possible for a capital...

This paper focuses on the role of institutions in poverty alleviation, where both poverty and institutions are interpreted broadly. The broadening of the poverty notion is important at least from the policy perspective. Even if one were convinced that higher growth would reduce income poverty to...