Research

Fields of Interest

Macroeconomics, Public Economics


Publications


(with Laurence Ales and Jessie Jiaxu Wang)

Abstract:  We study the optimal taxation of top labor incomes.  Top income earners are modeled as managers who operate a span of control technology as in Rosen (1982).Managers are heterogeneous across talent, which is both effort-augmenting and total-factor-productivity improving. The latter gives rise to a positive scale-of-operationseffect. A tax formula for optimal taxes is derived linking optimal marginal tax rates to preferences and technology parameters. We show how to quantify the model usingreadily available firm-level data. Our benchmark calibration focuses on the US. Our results suggest that optimal top taxes are roughly in line with the current statutory ratesand, thus, are significantly lower than what previous optimal taxation studies that ignore the scale-of-operations effect have shown. Similar quantitative findings hold when we extend the analysis to a panel of developed countries.


          (with Martín Besfamille) -- Online Appendix

Abstract:  We study the optimal degree of fiscal decentralization in a federation. Regional governments are characterized by their abilities to deliver public goods (administrative capacity) and to raise tax revenues (fiscal capacity). Two regimes are compared on efficiency grounds. Under partial decentralization, regional governments rely on central bailouts to complete local projects in financing needs. Under full decentralization, marginal financing is achieved via local capital taxes. We show that the presence of sufficiently low levels of administrative capacity is a necessary condition for full decentralization dominance. This condition may also be sufficient, depending on the projects’ characteristics. Some extensions are presented.


          (with Martín Besfamille) -- Online Appendix

Abstract:  In assessing tax decentralization optimality, a dilemma between efficiency and redistribution emerges: tax decentralization enhances fiscal discipline, but may also widen interregional disparities by triggering tax competition over mobile tax bases. We present a model that formalizes this trade-off, and find that tax decentralization can be optimal even under Rawlsian social preferences which only weight the welfare of the poorest region in the economy. We also revisit the empirical relationship between tax decentralization and regional disparities. Our estimates uncover a hump-shaped profile, which can be compatible with our normative prescriptions when social aversion for interregional inequality is low.

Media Coverage: El Correo Gallego Newspaper


(with Begoña Domínguez and Elyse Dwyer)

Abstract: This paper quantifies the productivity advantages of urban firms  in Australia. Following Combes et al. (2012), we decompose  the source of urban advantages into agglomeration and selection effects using the most exhaustive data source on Australian businesses: the Business Longitudinal Data Environment (BLADE). We find that urban advantages increase the productivity of the average firm by nearly 6%, and that most of such advantages are attributed to agglomeration effects rather than selection. Urban advantages differ substantially across sectors and by firm age. In particular, they are larger in services than in manufacturing, and relatively benefit mature firms. We also perform a state-level analysis which largely confirms our main findings at the country-level.

Media Coverage: The Australian Newspaper, New South Wales Productivity Commission



Working Papers


Abstract: This paper develops a  dynamic Mirrlees model with altruism to study the role of wealth taxes in providing insurance against lifespan risk. I derive novel formulas linking optimal taxes on savings and bequests to the degree of annuity market imperfections at the optimum. In the presence of a positive correlation between productivity and life expectancy, optimal annuity loadings are positive in expectation. This creates a force not only for taxing savings but also for subsidizing bequests. When calibrating the model, I find that the forces of differential longevity on optimal wealth taxes are commensurate with statutory levels of wealth taxation in developed countries. Relative to the status quo, optimal policies increase welfare of the short-lived at the bottom of the skill distribution to provide work incentives. This channel can generate welfare gains in the order of 0.24% of annual dynastic consumption.

Online Appendix



Work in Progress


Discussions