Optimal Income Tax Policy and Wage Subsidy

We show that in an imperfectly competitive economy, if the government cannot use wage subsidy, in a steady state and in the initial period the optimal labour income tax rate is zero. In an imperfectly competitive economy, since investment is primarily triggered by the motive to earn higher profits, over accumulation of capital induces suboptimal level of working hours. We argue that if the government is restricted to subsidize wage, the optimal policy should set zero tax on labour income which will encourage workers to increase working hours back to the optimal level.

Optimal Taxation in a Two Sector Economy with Heterogeneous Agents

In this paper we examine the optimal taxation problem in a two sector economy with heterogeneous agents. We show that in a steady state of this economy the optimal capital income tax rate can be different from zero. In this economy since capital and labour margins are interdependent, any difference in investment goods and consumption goods prices allows the government to tax capital income in one sector and undo the tax distortion by differential labour income taxation. This policy serves efficiency purpose as it restores the production efficiency condition.Optimal Taxation, Ramsey Problem, Heterogeneous Agents

Monopoly Power and Optimal Taxation of Labor Income

This paper studies the Ramsey problem of optimal labor income taxation in a simple model economy which deviates from a first best representative agent economy in three important aspects, namely, flat rate second best tax, monopoly power in intermediate product market, and monopolistic wage setting. There are three key findings: (1) In order to correct for monopoly distortion the Ramsey tax prescription is to set the labor income tax rate lower than its competitive market analogue; (2) Government’s optimal tax policy is independent of its fiscal treatment of distributed pure profits; and (3) For higher levels of monopoly distortions Ramsey policy is more desirable than the first best policy. The key analytical results are verified by a calibration which fits the model to the stylized facts of the US economy.Optimal taxation, Monopoly power, Ramsey policy

Policy Reforms and Incentives in Rice Production in Bangladesh

We estimate an institutional production function to capture incentive induced growth in total factor productivity (TFP) of rice production in Bangladesh. The incentive component of TFP assists in explaining how farmers responded to the changes in incentives which were introduced during the major policy reforms undertaken in the 1980s and the 1990s.Bangladesh, Reforms, Agriculture, TFP, Incentives.

Heterogeneous Students, Impartial Teaching and Optimal Allocation of Teaching Methods.

This paper addresses the issue of identifying optimal mix of teaching methods for an instructor when students are of heterogeneous types. The exact student type cannot be identified ex ante which forces the instructor to act impartially and allocate teaching methods according to some pre-designed plan. In a simple model of instructor-student interaction, we show that if the instructor acts benevolent and impartially towards preparing the initial teaching method plan, there exists a unique optimal mix of teaching methods. We calibrate the impartial teaching model with data on the teaching of Business and Economics related undergraduate and postgraduate units, and find that the characterized optimal teaching method mix differs significantly across different units.Active Teaching, Passive Teaching, Impartial Teaching

Mercy through the Ages: A Glance into the Window of Paradise - A Study of Surah al-Rahman with Six Exegeses, Dating from the Tenth to the Twentieth Century

B.A. Honors Thesis in the Department of Religious Studies, 2011This paper explores the distinctions in interpretation of surah al-Rahman of the Holy Qur’an based on the exegeses of al-Tabari, al-Huwwari, al-Qushayri, al-Qurtubi, al-Jalalayn, and al-Maraghi. These commentaries range in time period from the late ninth century to the late twentieth century and are also representative of different modes of thought, such as mainstream, Sufi, and modernist frameworks. Interpretations also reflect emphasis upon grammatical explanations or legal issues in some cases. The study first discusses a context for the time and location of each commentator, whereupon the paper moves into an analysis of the components and depictions of the surah, or chapter. The final section of the paper illustrates the timelessness of this surah and its significance to Muslims everywhere.Dr. David B. Cook - Rice University Religious Studie

Labour productivity and rice production in Bangladesh: a stochastic frontier approach

In this paper we examine the significance of labour productivity and use of inputs in explaining technical efficiency of rice production in Bangladesh. We find that higher labour productivity can stimulate high efficiency gains, but increased use of inputs (except land) induces negative marginal effect on technical efficiency. While more use of land, improved seeds and fertilizers contributes to the rate of labour-productivity induced marginal efficiency gain, any additional labour depresses this rate. Given the agricultural policy reform history in Bangladesh, our findings imply that rather than providing input subsidy or output price support, future reforms should put more emphasis on providing incentives to enhance labour productivity and encourage formalization of the agricultural labour market

Optimal tax policy and wage subsidy in an imperfectly competitive economy

In an imperfectly competitive economy with direct taxes, the first best wage subsidy overcompensates worker 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 labour income at a zero rate. This policy is optimal because it minimizes the incentive to misreport working hours

Optimal capital income taxation in a two sector economy

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 consumption sector. In a two sector neoclassical economy, interdependence of labour and capital margins allows the government to choose an optimal policy that involves nonzero tax on capital income. The distortion created by capital income tax in consumption sector can be undone by setting different rates of labour income taxes. The optimal plan thus involves zero capital income tax in both sectors only if optimal labour income taxes are equal. This may not be the optimal policy if marginal disutility of work is different across sectors and/or the social marginal value of capital is different across sectors. The difference in social marginal value of capital can be undone by setting different labour income taxes across sectors. We also show that if the government faces a constraint of keeping same capital and labour income tax rates across sectors, optimal capital income tax is nonzero