Yet another reason to tax goods

The optimal taxation of goods, labor and capital income is considered in a two period model where: i) private information changes through time; ii) savings are not observed, and; iii) savings a§ect preferences conditional on the realization of types. The simultaneous appearance of these three elements cause optimal commodity taxes to depend on o§-equilibrium savings. As a consequence, separability no longer su¢ ces for the uniform taxation prescription of Atkinson and Stiglitz (AS) to obtain. If preferences are homothetic AS is partially restored: taxes are uniform within periods, however, future consumption is taxed at a higher rate than current consumption.

Education, preferences for leisure, and the optimal income tax schedule

Recent advances in dynamic Mirrlees economies have incorporated the treatment of human capital investments as an important dimension of government policy. This paper adds to this literature by considering a two period economy where agents are di erentiated by their preferences for leisure and their productivity, both private information. The fact that productivity is only learnt later in an agent's life introduces uncertainty to agent's savings and human capital choices and makes optimal the use of multi-period tie-ins in the mechanism that characterizes the government policy. We show that optimal policies are often interim ine cient and that the introduction of these ine ciencies may take the form of marginal tax rates on labor income of varying sign and educational policies that include the discouragement of human capital acquisition. With regards to implementation, state-dependent linear taxes implement optimal savings, while human capital policies may require labor income taxes that depend directly on agents' schooling.

Land taxes in a Latin American context

Since Henry George (1839-1897) economists have been arguing that a tax on unimproved land is an ideal tax on efficiency grounds. Output taxes, on the other hand, have distortionary effects on the economy. This paper shows that under asymmetric information output taxes might be used along with land tax in order to implement an optimal taxation scheme in a Latin American context, i.e., where land rental markets are relatively thin, land property provides non-agricultural payoffs and there is nonrevenue objectives of land taxation. Also, the model has two implications that can be tested empirically: (i) there is evasion when schemes based only on land taxes are implemented; (ii) this evasion is more severe for large landholders.

Unemployment insurance an analysis of optimal mechanisms under aggregate shocks

The purpose of this work is to provide a brief overview of the literature on the optimal design of unemployment insurance systems by analyzing some of the most influential articles published over the last three decades on the subject and extend the main results to a multiple aggregate shocks environment. The properties of optimal contracts are discussed in light of the key assumptions commonly made in theoretical publications on the area. Moreover, the implications of relaxing each of these hypothesis is reckoned as well. The analysis of models of only one unemployment spell starts from the seminal work of Shavell and Weiss (1979). In a simple and common setting, unemployment benefits policies, wage taxes and search effort assignments are covered. Further, the idea that the UI distortion of the relative price of leisure and consumption is the only explanation for the marginal incentives to search for a job is discussed, putting into question the reduction in labor supply caused by social insurance, usually interpreted as solely an evidence of a dynamic moral hazard caused by a substitution effect. In addition, the paper presents one characterization of optimal unemployment insurance contracts in environments in which workers experience multiple unemployment spells. Finally, an extension to multiple aggregate shocks environment is considered. The paper ends with a numerical analysis of the implications of i.i.d. shocks to the optimal unemployment insurance mechanism.

The optimality of the Friedman rule when some distorting taxes are exogenous

This paper investigates the optimality of the Friedman rule in a two-sector small open economy. That policy prescription is found to be a necessary condition for Pareto efficiency. If a planner can select all conceivable distorting taxes, then, for some initial values of public debt, money balances and foreign assets, it is possible to decentralize a Pareto efficient allocation. If the planner can select only some of these tax rates, then second-best policies may also satisfy the Friedman rule. However, this last result depends on the set of tax instruments the planner can choose from.