The non-cooperative provision of public goods is analysed in the context of a two-stage game in which club size is determined endogenously. Equilibrium club size and voluntary labour supply are shown to be inefficient. The impact of optimally-chosen fiscal policies using simple instruments is...

An overlapping generations model is constructed in which individual wealth is related to educational attainment, and in which liquidity constraints my induce children to invest in a sub-optimal level of education given their ability. Borrowing for educational attainment is obtained from within...

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...

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...

This paper analyzes optimal employment and wage policies in the public sector in a model with endogenous involuntary unemployment. A public sector is introduced into models where shirking or turnover costs are present, and optimal wage and employment policies are derived. In both models, the...

Governments typically used expenditures extensively as redistributive devices. Examples include the public provision of health, education, welfare, and public pensions. The purpose of this paper is to investigate the normative rationale for such policies. In particular, we study the role of...

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...