A tax distorted real business cycle model is parameterized, calibrated, and solved numerically in an attempt to measure the size of Harberger Triangles relative to Okun Gaps. In particular, the model constructed is used to study, quantitatively, the impact of various distortional government tax...

We find conditions for the Friedman rule to be optimal in three standard models of money. These conditions are homotheticity and separability assumptions on preferences similar to those in the public finance literature on optimal uniform commodity taxation. We show that there is no connection...

We study dynamic optimal taxation in a class of economies with private information. Constrained optimal allocations in these environments are complicated and history-dependent. Yet, we show that they can be implemented as competitive equilibria in market economies supplemented with simple tax...

For a wide class of dynamic models, Chamley (1986) has shown that the optimal capital income tax rate is zero in the long run. Lucas (1990) has argued that for the U.S. economy there is a significant welfare gain from switching to this policy. We show that for the Bewley (1986) class of models...

A sizeable literature has argued that the growth effects of changes in flat rate taxes are small. In this paper, we investigate the relatively unexplored area of the growth effect of changes in the tax structure, in particular, in the progressivity of taxes. Considering such a tax reform seems...

With a monetary union in place, many European countries are now debating if and how to coordinate their tax policies. Of particular interest to EU ministers is taxation of mobile factors like capital. Mendoza and Tesar (MT) use a game-theoretic approach to address the question, What is the...

Entrepreneurship is a key determinant of investment, saving, wealth holdings, and wealth inequality. We study the aggregate and the distributional effects of several tax reforms in a model that recognizes the key role played by the entrepreneurs, and that matches very well the extreme degree of...

Previous studies quantifying the effects of increased capital taxation during the U.S. Great Depression find that its contribution is small, both in accounting for the downturn in the early 1930s and in accounting for the slow recovery after 1934. This paper confirms that the effects are small...

Theoretical advances in macroeconomics made in the last three decades have had a major influence on macroeconomic policy analysis. Moreover, over the last several decades, the United States and other countries have undertaken a variety of policy changes that are precisely what macroeconomic...

Americans now work 50 percent more than do the Germans, French, and Italians. This was not the case in the early 1970s when the Western Europeans worked more than Americans. In this paper, I examine the role of taxes in accounting for the differences in labor supply across time and across...