Without policy reforms, the aging of the U.S. population is likely to increase the burden of the currently unfunded Social Security and Medicare systems. In this paper we build an applied general equilibrium model and incorporate the population projections made by the Social Security Administration (SSA) to evaluate the macroeconomic and welfare implications of alternative fiscal responses to t...

We estimate the importance of household liquidity for the effect of the Car Allowance Rebate System (CARS) on vehicle transactions. We measure the average program impact by comparing households with “clunkers” eligible for CARS to households with similar vehicles that are ineligible. The liquidity provided by CARS contributed to its larger than anticipated take-up. Clunkers with existing loans,...

This paper considers a Ramsey model of linear capital and labor income taxation in which the government cannot commit ex-ante to a sequence of policies for the future. In this setup, if the government is more impatient than the government, the capital income tax will always be positive in steady state. Thus, impatience and lack of commitment are able to generate positive capital taxes in the lo...

We analyze the role of government intertemporal budget policies in a growing open economy including nominal assets in the presence of an upward sloping supply of debt. This introduces transitional dynamics that influence the effects of government policy instruments on the long term fiscal liability. In particular, shifts in capital income taxes can lead to dynamic scoring effects through the ev...

The Kyoto Protocol to the United Nations Framework Convention on Climate Change has set legally binding emissions targets for a basket of six greenhouse gases and timetables for industralised countries. It has also incorporated three international flexibility mechanisms. However, the Articles defining the flexibility mechanisms carry wording that their use must be supplemental to domestic actio...

China has performed under its new inter-governmental Fiscal System (so called “tax-sharing system”) for about seven years since 1994. The main contents of the system are the reallocation of governmental responsibilities and sharing of taxes between the central and provincial level. Theoretically, one of the main purposes is to realize equalization of public service all over the country. In fact...

In this paper we present survey evidence suggesting that there exists a sizeable fiscal illusion amongst the general public in Sweden. Respondents in a nationwide and representative survey systematically underestimate the share of an ordinary worker‟s income that is transferred to the public sector. Furthermore, we make a theoretical distinction between tax illusion and fiscal obfuscation, a pr...

This paper goes beyond traditional political budget cycles studies by considering the impact of the election calendar on the composition of tax revenue (direct taxes versus indirect taxes) rather than on the global level. We develop a theoretical model, based on Drazen and Eslava (2009) to predict how the taxation structure will be modified during election years. Using a panel of 58 developing ...