This paper uses a two-region, two-period overlapping generations model with international labor mobility to examine the efficacy of using tax policy to internalize the externalities created by international labor migration. While a brain drain tax has a substantial limiting effect on labor migration and a small negative effect on per worker growth, it is found to be a viable solution to the neg...

This paper offers a first empirical investigation of how labor taxation (income and payroll taxes) affects individuals' well-being. For identification, we exploit exogenous variation in tax rules over time and across demographic groups using 26 years of German panel data. We find that the tax effect on subjective well-being is significant and positive when controlling for income net of taxes. T...

Happy Taxpayers? Income Taxation and Well-Being This paper offers a first empirical investigation of how labor taxation (income and payroll taxes) affects individuals' well-being. For identification, we exploit exogenous variation in tax rules over time and across demographic groups using 26 years of German panel data. We find that the tax effect on subjective well-being is significant and posi...

Wealth inequality is currently rising in rich countries. Expectations that ever more intelligent machines might replace people’s jobs amplify the concerns about an increasingly unequal wealth distribution. We examine how capital tax-financed public investment affects the distribution of wealth when the substitutability between capital and labor changes. We consider a setting with a labor-augmen...

This paper introduces an index of tax optimality that measures the distance of some current tax structure from the optimal tax structure in the presence of public goods. In doing so, we derive a [0, 1] number that reveals immediately how far the current tax configuration is from the optimal one and, thereby, the degree of efficiency of a tax system. We call this number the Tax Optimality Index....

Article history: Received 3 July 2014 Available online 3 September 2015 JEL classification: C72 D03 H41

This paper examines the equilibrium relationship between politics and the economy. I consider a repeated-election model with policy and office motivated politicians. The incumbent politician chooses a tax rate and oversees the activities of the private and public sectors. Politicians differ in their ability to increase the productivity of the private sector, and in their ability to transform ta...

This paper studies how the level of the public good and the amounts of taxes are determined in a bargaining model. Using the Nash bargaining solution as the solution concept, the paper shows that the nature of individuals’ preferences over the public good and private good determines the nature of the tax regime. In particular, the paper characterizes conditions on preferences under which the Na...

This paper analyzes the private provision of public goods where consumers interact within a fixed network structure and may benefit only from their direct neighbors’ provisions. We present a proof for existence and uniqueness of a Nash equilibrium with general best-reply functions. Our uniqueness result simultaneously extends similar results in Bergstrom, Blume, and Varian (1986) on the private...

Recent studies consider public R&D spending that affects abatement knowledge and endogenous growth, distortionary taxes that affect physical and human capital formation, pollution taxes that affect environmental degradation, and regeneration that restores natural capital. Our model combines all of those elements. We show how the combination affects results from each prior model, focusing on two...