The prevalent assertion that replacement valued depreciation deductions are superior to historic valued deductions is critically examined in this paper. The neoclassical theory of the firm with constraints on debt issue provides the analytic foundations for examining the investment decision of...

Until fairly recently, the Pigovian position that activities generating unpriced external economies would be undersupplied was universally accepted. It rested on the simple assertion that marginal social benefits exceeded marginal private benefits of the activity, and that, by equating the...

We study federal economies in which regional governments have responsibility for delivering public services and redistributive objectives apply. The implications of these for the assignment of revenue-raising instruments and fiscal transfers, both vertical and horizontal, are considered. Models...

Market failure in the financing of risky projects is studied. Project risk includes idiosyncratic and aggregate components. Banks can investigate aggregate risk and can evaluate the idiosyncratic risk of each entrepreneur. They engage in Bertrand competition for entrepreneurs using interest...

This paper studies the conflict of interest between politicians and better-informed bureaucrats when they have differing preferences over a public project. We start with a baseline model where a bureaucrat advises a single decision maker (politician) whether to adopt a project. The bureaucrat...

We consider the implications of ethical behaviour on the effect of a redistributive tax-transfer system. In choosing their labour supplies, individuals take into account whether their tax liabilities correspond to what they view as ethically acceptable. If tax liabilities are viewed as ethically...

We examine whether minimum wages can fulfill a useful role as part of an optimal non-linear income tax scheme. In this setting, governments cannot observe household abilities, only their incomes. Redistributing according to income, the government is constrained by a set of incentive constraints....

Welfare programs including disability benefits have been considered as an efficient way of delivering transfers to the needy. This paper addresses the importance of administrative cost of welfare systems by focusing on an agency problem arising between the government and social workers, whose...