Published as an article in: Topics in Macroeconomics, 2005, vol. 5, issue 1, article 17.

This paper studies the implications for the optimal policy of introducing an exogenous minimum wage into a standard public finance model. We present a dynamic general equilibrium model with a Ramsey planner deciding about public spending, labor income taxes and debt. We find that, for...

Published as an article in: Journal of Monetary Economics, 2003, vol. 50, issue 6, pages 1311-1331.

This paper studies if imperfections in the labor market justify a diferent fiscal policy. We present a dynamic general equilibrium model with a Ramsey planner deciding about public spending, labor taxes and debt. Two diferent labor market setups are considered. First we assume a competitive...

In this paper we show that in a two sector economy with heterogeneous agents and competitive markets, in a steady state the optimal capital income tax rate is in general different from zero. The optimal tax policy in this setting depends on the relative price difference. In a two sector economy...

In this paper we calibrate the social cost of optimal taxes in a class of imperfectly competitive economies and examine the correspondence of this social cost with the number of tax instruments and the number and the sources of distortions. We calibrate the Ramsey equilibrium for three standard...

We extend the celebrated Chamley-Judd result of zero capital income tax and show that the steady state optimal capital income tax is nonzero, in general. In particular, we find that the optimal plan involves zero capital income tax in investment sector and a nonzero capital income tax in...

In an imperfectly competitive economy with direct and indirect taxes, the first best wage subsidy overcompensates workers and provides the incentive to misreport working hours. We show that in the second best optimum where the government cannot use a wage subsidy, the optimal policy is to tax...

We examine the optimal taxation problem in a two sector neoclassical economy with workers and capitalists. We show that in a steady state of this economy the optimal policy may involve a capital income tax or subsidy, differential taxation of labour income and redistribution. The level and the...

In this paper we show that in a two sector economy with heterogeneous agents and competitive markets, in a steady state the optimal capital income tax rate is in general different from zero. The optimal tax policy in this setting depends on the relative price difference. In a two sector economy...