This paper provides a theoretical analysis of optimal minimum wage policy in a perfectly competitive labor market. We show that a binding minimum wage -while leading to unemployment -is nevertheless desirable if the government values redistribution toward low wage workers and if unemployment induced by the minimum wage hits the lowest surplus workers first. This result remains true in the prese...

Differential property tax policy for farmland is often set under conditions of uncertainty and limited information regarding landowners’ objective functions. This study examines optimal differential tax policy for a parcel of agricultural land facing uncertain development, identifying instances in which common farmland taxation policies may be non-optimal. Optimal tax rates are characterized gi...

this paper argues that a risk averse of workers after-tax reservation wage the difference between her reservation wage and the tax needed to fund the unemployment insurance system when liquidity constraint binds exists and it is unique. the optimality of unemployment insurance based on the responsiveness of reservation wage to unemployment benefit shows the disincentive effect, i.e. higher unem...

This paper studies the dynamic Ramsey taxation of foreign assets in a small open economy model with international mobility of capital. The benevolent government of the small open economy chooses taxes on factors of local production and net foreign assets to finance an exogenous stochastic stream of government expenditures. The government can fully commit to future policies and balanced budgets,...

This paper provides a theoretical analysis of optimal minimum wage policy in a perfectly competitive labor market. We show that a binding minimum wage – while leading to unemployment – is nevertheless desirable if the government values redistribution toward low wage workers and minimum wage induced unemployment hits the lowest surplus workers first. This result remains true in the presence of o...

We characterize the Ramsey optimal rate of inflation in a model with a foreign demand for domestic currency. In the absence of such demand, the model implies that the Friedman rule—deflation at the real rate of interest— is optimal. We show analytically that in the presence of a foreign demand for domestic currency, this result breaks down. Calibrated versions of the model deliver optimal annua...

The indeterminacy of the optimal fiscal policy that emerges in a stochastic setting has been characterized by Zhu (1992) and Chari, Christiano and Kehoe (1994). There are infinite paths of ex-post capital income tax rates and state-contingent debt return supporting the optimal allocations of consumption, investment and leisure. The main goal of this paper is to introduce identification constrai...