Essays in dynamic optimal taxation: working experience, unemployment scarring and poverty

This thesis investigates the design of optimal tax systems in dynamic environments. The first essay characterizes the optimal tax system where wages depend on stochastic shocks and work experience. In addition to redistributive and efficiency motives, the taxation of inexperienced workers depends on a second-best requirement that encourages work experience, a social insurance motive and incentive effects. Calibrations using U.S. data yield higher expected optimal marginal income tax rates for experienced workers for most of the inexperienced workers. They confirm that the average marginal income tax rate increases (decreases) with age when shocks and work experience are substitutes (complements). Finally, more variability in experienced workers' earnings prospects leads to increasing tax rates since income taxation acts as a social insurance mechanism. In the second essay, the properties of an optimal tax system are investigated in a dynamic private information economy where labor market frictions create unemployment that destroys workers' human capital. A two-skill type model is considered where wages and employment are endogenous. I find that the optimal tax system distorts the first-period wages of all workers below their efficient levels which leads to more employment. The standard no-distortion-at-the-top result no longer holds due to the combination of private information and the destruction of human capital. I show this result analytically under the Maximin social welfare function and confirm it numerically for a general social welfare function. I also investigate the use of a training program and job creation subsidies. The final essay analyzes the optimal linear tax system when there is a population of individuals whose perceptions of savings are linked to their disposable income and their family background through family cultural transmission. Aside from the standard equity/efficiency trade-off, taxes account for the endogeneity of perceptions through two channels. First, taxing labor decreases income, which decreases the perception of savings through time. Second, taxation on savings corrects for the misperceptions of workers and thus savings and labor decisions. Numerical simulations confirm that behavioral issues push labor income taxes upward to finance saving subsidies. Government transfers to individuals are also decreased to finance those same subsidies.

Reform and Redesign: A Review of the Changing Role of the Public Purposes in R&D and Technology Institutes (Working Paper 17)

As the globalization of knowledge has taken hold over the past decade, and as governments around the world review their new roles in support of the production of knowledge, several factors have shaped the context in governments’ approach to public research. Arguably, none has been more affected by these pressures for reform than government scientific and technology laboratories or institutes. Often ignored in the re-shaping of national systems of innovation, these organizations play an important role in advancing national economic and social objectives. This paper, by reviewing examples of reforms underway in several countries, including Canada, France, Germany, the UK, Japan, USA and Latin America, will argue that government research and technology institutes — often historically surrogates for industrial research — are gradually re-defining their mandates to meet the new pressures of globalization as well as satisfying growing public demands for increased relevance and efficiency in responding to citizens’ and industry needs.

Sustaining a Relationship : Insights from Canada on Linking the Government and Third Sector (Working Paper 1)

The embedding of third sector organisations in the policy world is fraught with tensions. Accountability and autonomy become oppositional forces causing an uneasy relationship. Government agencies are concerned that their equity and efficiency goals and objectives be met when they enter partnerships with the third sector for the delivery of programs and services. Third sector agencies question the impact of accountability mechanisms on their independence and identities. Even if the relationship between government and third sector agencies seems to be based on cooperation, concerns about cooptation (for nonprofits) and capturing (for governments) may linger calling the legitimacy of the partnership into question. Two means of improving the relationship between the governing and third sectors have been proposed recently in Canada by the Panel on Accountability and Governance in the Voluntary Sector (PAGVS) and the Joint Tables sponsored by the Voluntary Sector Task Force (VSTF). The two endeavours represent a historic undertaking in Canada aimed at improving and facilitating the relationship between the federal government and the nonprofit sector. The reports borrow on other country models but offer new insights into mediating the relationship, including new models for a regulatory body and a charity compact for Canada. Do these recommendations adequately address concerns of autonomy, accountability and cooptation or capturing? The Canadian reports do offer new insights into resolving the four tensions inherent in partnerships between the governing and third sector but also raise important questions about the nature of these relationships and the evolution of democracy within the Canadian political system.