Abstract: This paper studies the aggregate and distributional effects of raising the top marginal income tax rate in the presence of tax avoidance. To this end, we develop a quantitative macroeconomic model with heterogeneous agents and occupational choice in which entrepreneurs can avoid taxes in two ways. On the extensive margin, entrepreneurs can choose the legal form of their business organization to reduce their tax burden. On the intensive margin, entrepreneurs can shift their income between different tax bases. In a quantitative application to the US economy, we find that tax avoidance weakens the distortionary effects of higher income taxes at the top but makes them ineffective at lowering inequality. Eliminating tax avoidance by implementing an equal tax treatment of entrepreneurs across all legal forms of business organization substantially increases tax revenue, aggregate output, and welfare.

Abstract: Women are more likely to work in jobs with low hours than men. Low-hours jobs are associated with lower hourly wages and are more likely impacted by minimum wage policies that set a floor on hourly wages. We document that the first German minimum wage increased women's transition towards jobs with higher weekly hours. We construct and estimate an equilibrium search model with demographic and firm productivity heterogeneity and jobs that differ in both wage and hours requirements. The model replicates observed gender gaps in employment, hours and wage and the positive relationship between hours and hourly wages. We implement the minimum wage in our model with a penalty to address non-compliance. Based on our model, the minimum wage primarily reduces the gender income gap through the gender wage gap, but it also reduces gender employment and hours gaps due to an upward reallocation effect that results in women's increased participation in higher-hours jobs with lower separation rates. We find that despite a shift in the offer distribution toward full-time jobs, firms' response to the minimum wage dampens the upward reallocation in hours due to disproportionate wage increases in low-hours job offers. We also study the heterogeneity in the minimum wage's impact across different demographic groups.

Abstract: Teenage childbearing is a common incident in developed countries. However, teenage births are much more likely in the United States than in any other industrialized country. Most of these births are delivered by female teenagers from low-income families. The hypothesis put forward here is that the welfare state (a set of redistributive institutions) has a significant influence on teenage childbearing behavior. We develop an economic theory of parental investments and the risky sexual behavior of teenagers. The model is estimated to fit stylized facts about income inequality, intergenerational mobility, and the sexual behavior of teenagers in the United States. The welfare state institutions are introduced via tax and public education expenditure functions derived from U.S. data. In a quantitative experiment, we impose Norwegian taxes and education spending in the economic environment. The Norwegian welfare state institutions go a long way in explaining the differences in teenage birth rates between the United States and Norway.

Abstract: Recent empirical literature documents that payroll tax reductions or minimum wages can have unintended reallocation and spillover effects on workers not directly targeted by these policies. We quantify these effects using an equilibrium search-and-matching model featuring heterogeneous workers and firms, labor taxation and a minimum wage. The model shows that payroll tax reductions increase the set of viable job matches between low-productivity workers and firms. This effect has two equilibrium consequences. First, there is a negative reallocation effect: the share of job vacancies posted by low-quality firms increases, making it harder for all workers to match with high-quality ones. Second, there are negative spillovers across workers: low-productivity workers participate more in the labor force, which creates congestion on the labor market and lowers the job-finding rate for all workers. Estimating the model on French data before a substantial low-wage payroll tax reduction in 1995, we show that these effects can get large for low-wage tax reductions that do not cover jobs in a broad wage range. We also show that the efficiency-maximizing policy mix involves moderately regressive payroll taxation and a low but binding minimum wage.