Reinventing the Dutch tax-benefit system; exploring the frontier of the equity-efficiency trade-off

European governments aim to raise labour supply, cut unemployment and, at the same time, maintain social cohesion. Yet, economists have stressed the trade-off between these objectives. This paper reviews the key policy insights from optimal tax theory to identify options for reform in the tax-benefit system that can potentially improve the equity-efficiency trade-off. Using a comprehensive applied general equilibrium model, we then explore whether reforms along these lines in the actual Dutch tax-benefit system will raise employment without sacrificing equality. The analysis reveals that selective tax relief for elastic secondary earners and low-skilled workers have this potential. A flat income tax structure possibly combined with a negative income tax worsens the equity-efficiency trade-off.

Constraint-based Causal Discovery for Non-Linear Structural Causal Models with Cycles and Latent Confounders

We address the problem of causal discovery from data, making use of the recently proposed causal modeling framework of modular structural causal models (mSCM) to handle cycles, latent confounders and non-linearities. We introduce {\sigma}-connection graphs ({\sigma}-CG), a new class of mixed graphs (containing undirected, bidirected and directed edges) with additional structure, and extend the concept of {\sigma}-separation, the appropriate generalization of the well-known notion of d-separation in this setting, to apply to {\sigma}-CGs. We prove the closedness of {\sigma}-separation under marginalisation and conditioning and exploit this to implement a test of {\sigma}-separation on a {\sigma}-CG. This then leads us to the first causal discovery algorithm that can handle non-linear functional relations, latent confounders, cyclic causal relationships, and data from different (stochastic) perfect interventions. As a proof of concept, we show on synthetic data how well the algorithm recovers features of the causal graph of modular structural causal models.Comment: Accepted for publication in Conference on Uncertainty in Artificial Intelligence 201

Unitarity and predictiveness in new Higgs inflation

In new Higgs inflation the Higgs kinetic terms are non-minimally coupled to the Einstein tensor, allowing the Higgs field to play the role of the inflaton. The new interaction is non-renormalizable, and the model only describes physics below some cutoff scale. Even if the unknown UV physics does not affect the tree level inflaton potential significantly, it may still enter at loop level and modify the running of the Standard Model (SM) parameters. This is analogous to what happens in the original model for Higgs inflation. A key difference, though, is that in new Higgs inflation the inflationary predictions are sensitive to this running. Thus the boundary conditions at the EW scale as well as the unknown UV completion may leave a signature on the inflationary parameters. However, this dependence can be evaded if the kinetic terms of the SM fermions and gauge fields are non-minimally coupled to gravity as well. Our approach to determine the model's UV dependence and the connection between low and high scale physics can be used in any particle physics model of inflation.Comment: 21+6 pages, 1 figure; final version accepted by the journal, improvements of section

Gauge field production in SUGRA inflation: local non-Gaussianity and primordial black holes

When inflation is driven by a pseudo-scalar field \chi coupled to vectors as \alpha/4 \chi F \tilde F, this coupling may lead to a copious production of gauge quanta, which in turns induces non-Gaussian and non-scale invariant corrections to curvature perturbations. We point out that this mechanism is generically at work in a broad class of inflationary models in supergravity hence providing them with a rich set of observational predictions. When the gauge fields are massless, significant effects on CMB scales emerge only for relatively large \alpha. We show that in this regime, the curvature perturbations produced at the last stages of inflation have a relatively large amplitude that is of the order of the upper bound set by the possible production of primordial black holes by non-Gaussian perturbations. On the other hand, within the supergravity framework described in our paper, the gauge fields can often acquire a mass through a coupling to additional light scalar fields. Perturbations of these fields modulate the duration of inflation, which serves as a source for non-Gaussian perturbations of the metric. In this regime, the bounds from primordial black holes are parametrically satisfied and non-Gaussianity of the local type can be generated at the observationally interesting level f_NL =O(10).Comment: 17 pages, 8 figure

Four futures of Europe

Europe is at a crossroads. The enlargement with ten new members forces the European Union to reform its decision making process and to reconsider its policies. At the same time, developments such as ageing force EU member states to reform their welfare states. Read also the accompanying press release .Where will this bring the European Union and its members states ten or twenty years from now? And how should policy makers deal with this uncertainty when deciding about policies with long-lasting consequences? This study develops four scenarios on the future of Europe. They serve as tools for analysing these questions. Moreover, the study elaborates on the policy agenda of international organisations and European governments in response to the various challenges during the next two decades.