Heterogeneity, monetary policy, Mirrleesian taxes, and the Friedman rule

We consider an overlapping-generations economy with money rationalized through a cash-in-advance constraint and heterogeneous agents subject to nonlinear taxation of labor income and linear taxation of commodity purchases. Some agents are more productive and more financially connected than others leading to their earning more income and requiring a proportionately smaller cash reserve to mediate their expenditures. We show that a nonlinear income tax can always fully neutralize the redistributive implications of who gets the extra money. On the other hand, with differences in financial connectedness, the tax policy cannot neutralize the redistributive implications of the monetary growth rate. Nevertheless the Friedman rule is found to be often desirable as a corner solution without having to impose arbitrary restrictions on the structure of agents' preferences. At the same time, the differences in connectedness may result in the violation of the Friedman rule

Wage endogeneity, tax evasion, and optimal nonlinear income taxation

This paper studies the interaction between tax evasion and wage endogeneity within a Mirrleesian optimal tax framework. It characterizes the optimal marginal income tax rates on the skilled and the unskilled workers and the optimal amount of resources to be spent on deterring tax evasion. It shows that tax evasion weakens the incentives for the government to manipulate the marginal tax rates for the purpose of exploiting general equilibrium effects on wages. Moreover, the extent of this depends on the curvature of the evasion cost function. It also argues that marginal income tax rates are likely to be higher when the government attempts to deter evasion

Capital income taxation and the Atkinson-Stiglitz theorem

Accounting for the role of financial system and money holdings in an optimal nonlinear income tax model, we argue that capital income taxation is a non-redundant policy tool even if individual preferences are separable between leisure and other goods

Probability Theory Compatible with the New Conception of Modern Thermodynamics. Economics and Crisis of Debts

We show that G\"odel's negative results concerning arithmetic, which date back to the 1930s, and the ancient "sand pile" paradox (known also as "sorites paradox") pose the questions of the use of fuzzy sets and of the effect of a measuring device on the experiment. The consideration of these facts led, in thermodynamics, to a new one-parameter family of ideal gases. In turn, this leads to a new approach to probability theory (including the new notion of independent events). As applied to economics, this gives the correction, based on Friedman's rule, to Irving Fisher's "Main Law of Economics" and enables us to consider the theory of debt crisis.Comment: 48p., 14 figs., 82 refs.; more precise mathematical explanations are added. arXiv admin note: significant text overlap with arXiv:1111.610

Nonlinear Pricing, Redistribution and Optimal Tax Policy.

TAXES;TAXATION;PUBLIC GOODS;GOVERNMENT POLICY

On Optimal Taxation of Housing.

This paper studies the question of optimal taxation of housing, when the set of tax instruments at the government's disposal is not artificially restricted. There are two groups of persons who differ in earning abilities and in tastes, and two types of housing goods (high- and low-quality). The paper characterizes the Pareto-efficient allocations that are attainable trough the tax policy.TAXATION ; EFFICIENCY

Stochastic Fertility, Moral Hazard, and the Design of Pay-As-You-Go Pension Plans

This article models a two-period overlapping generations economy in the steady state where the realization of the quantity-quality number of children depends on an initial investment in children and on a random shock. It shows that the implementation of the first-best allocation, in which the effort level is publicly observable, requires a subsidy on the investment in children. There should also be full insurance with respect to second-period consumption and pensions must be invariant to the number of children. On the other hand, when investment is unobservable and one cannot subsidize it, the full insurance property goes away. In this case, pensions must be linked positively to the number of children. (JEL codes: H55, J13) Copyright The Author 2011. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: [email protected], Oxford University Press.