Monetary union without fiscal coordination may discipline policymakers

We show that, with benevolent policymakers and fiscal leadership, monetary unification reduces inflation, taxes and public spending. These disciplining effects of a monetary union, which rise with the number of fiscal players in the union, are likely to raise welfare. Joining an optimally designed monetary union is particularly attractive if fiscal authorities do not care about inflation. Fiscal coordination offsets the disciplining effects of monetary unification. Hence, subsidiarity in fiscal policymaking may enhance welfare. Keywords: monetary union, fiscal leadership, common central bank, discipline, optimal institutions, inflation, taxation, spending, fiscal coordination.international economics and trade ;

Optimal Taxation and Social Insurance in a Lifetime Perspective

Advances in information technology have improved the administrative feasibility of redistribution based on lifetime earnings recorded at the time of retirement. We study optimal lifetime income taxation and social insurance in an economy in which redistributive taxation and social insurance serve to insure (ex ante) against skill heterogeneity as well as disability risk. Optimal disability benefits rise with previous earnings so that public transfers depend not only on current earnings but also on earnings in the past. Hence, lifetime taxation rather than annual taxation is optimal. The optimal tax-transfer system does not provide full disability insurance. By offering imperfect insurance and structuring disability benefits so as to enable workers to insure against disability by working harder, social insurance is designed to offset the distortionary impact of the redistributive labor income tax on labor supply.optimal lifetime income taxation; optimal social insurance

Why is Capital so Immobile Internationally?: Possible Explanations and Implications for Capital Income Taxation

The evidence on international capital immobility is extensive, ranging from the correlations between domestic savings and investment pointed out by Feldstein-Horioka (1980), to real interest differentials across countries, to the lack of international portfolio diversification. To what degree does capital immobility modify past results forecasting that small open economies should not tax savings or investment? The answer depends on the cause of this immobility. We argue that asymmetric information between countries provides the most plausible explanation for the above observations. When we examine optimal tax policy in an open economy allowing for asymmetric information, rather than simply finding that savings and investment should not be taxed, we now forecast government subsidies to foreign acquisitions of domestic firms. Some omitted factors that would argue against subsidizing foreign acquisitions are explored briefly.

Die Vereinbarkeit von Beruf und Familie: Lösungen für die gesamte Lebenszeit

In einer modernen wissensintensiven Wirtschaft ist Humankapital der Schlüssel zur Sicherung des Arbeitskräfteangebots und des Produktivitätszuwachses. Humankapital wird nicht nur in Schulen, sondern auch in der Familie und in Betrieben gebildet. Daher ist ein Gleichgewicht von Arbeit und Familienleben unerlässlich. In seinem Beitrag, der auf einem Vortrag bei der Konferenz "Social Policy Agenda for the European Union" am 28. und 29. Oktober in Amsterdam, basiert, analysiert A. Lans Bovenberg, CentER for Economic Research, Tilburg University, die Arbeitsmarktinstitutionen und die Arbeitskultur in den europäischen Ländern und fordert einschneidende Reformen, die es erlauben, Berufs- und Familienleben zu vereinbaren.Humankapital, Beschäftigung, Produktivität, Arbeitswelt, Familie

Optimal Environmental Taxation in the Presence of Other Taxes: General Equilibrium Analyses

This paper examines the optimal setting of environmental taxes in economies where other, distortionary taxes are present. We employ analytical and numerical models to explore the degree to which, in a second best economy, optimal environmental tax rates differ from the rates implied by the Pigovian principle (according to which the optimal tax rate equals the marginal environmental damages). Both models indicate, contrary to what several analysts have suggested, that the optimal tax rate on emissions of a given pollutant is generally less than the rate supported by the Pigovian principle. Moreover, the optimal rate is lower the larger are the distortions posed by ordinary taxes. Numerical results indicate that previous studies may have seriously overstated the size of the optimal carbon tax by disregarding pre-existing taxes.

Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance.

In the modern welfare state a substantial part of an individual’s tax bill is transferred back to the same individual taxpayer in the form of social transfers. This provides a rationale for financing part of social insurance through mandatory savings accounts. We analyze the behavioral and welfare effects of compulsory savings accounts in an intertemporal model with uncertainty, endogenous involuntary unemployment and retirement decisions, credit constraints, and heterogeneous agents. We show that the introduction of (early) retirement and unemployment accounts generates a Pareto improvement by enabling the government to provide lifetime income insurance and liquidity insurance ina more effcient manner.

The role of public debt in the game of double chicken

This paper explores how debt accumulation is affected by the strategic interactions between monetary and fiscal authorities. To achieve the second best with a dependent central bank, the government needs to be made both more conservative and more impatient. However, in the absence of political distortions, an optimally designed conservative, independent central bank is sufficient to establish the second best. In the presence of political distortions, however, also an optimal debt target is needed. Keywords: Central bank independence, price stability weights, (optimal) debt targets, strategic debt management, political distortions, optimal preferences.public economics ;

Savings Accounts and the Life-Cycle Approach to Social Insurance

Using Danish data, we find that about three fourths of the taxes levied to finance public transfers actually finance benefits that do not redistribute between people but redistribute income over the life cycle of individual taxpayers. This provides a rationale for financing part of social insurance via mandatory individual savings accounts. An account system that offers liquidity insurance and a lifetime income guarantee helps to alleviate the dilemma between insurance and incentives. To illustrate this, we analyse a specific proposal for reform of the Danish system of social insurance, involving the use of individual accounts. We estimate how the reform would affect the distribution of lifetime incomes, the public budget, and economic efficiency. Our analysis suggests that, even with conservative assumptions regarding labor supply elasticities, the proposed reform would generate a Pareto improvement and would imply only a minor increase in the inequality of lifetime income distribution.social insurance; individual accounts; lifetime income distribution