Fred Schroyen

Redistributive taxation and the household: the case of individual filings

In this paper I look at the tax treatment of households under individual filings and characterise the efficiency properties of an income tax schedule that redistributes from rich to poor households. Because tax liabilities are determined on individual incomes but the decision to earn those incomes is made at the household level, tax liable members of the same household can side trade leisure for net income with one another, and such side trade enables them to carry out tax arbitrage. I analyse the problem for a two-class economy both with and without perfect assortative mating. The main conclusion is that the prevention of tax arbitrage imposes structure on the graduation of the tax schedule.

Evaluating carbon capture and storage in a climate model with directed technical change

Carbon capture and storage (CCS) is considered a critical technology needed to curb CO2 emissions and is envisioned by the International Energy Agency (IEA) as an integral part of least-cost greenhouse gas mitigation policy. In this paper, we assess the extent to which CCS and R&D in CCS technology are indeed part of a socially efficient solution to the problem of climate change. For this purpose, we extend the intertemporal model of climate and directed technical change developed by Acemoglu et al. (2012, American Economic Review, 102(1): 131{66) to include a sector responsible for CCS. Surprisingly, even for an optimistic cost estimate available for CCS (

Multidimensional Screening in a Monopolistic Insurance Market: Proofs

60/ton of CO2 avoided), we find that it is not optimal to deploy CCS or devote resources to R&D in CCS technology either in the near or distant future. Indeed, it is only when the marginal cost of CCS is less than

Pareto efficient income taxation under costly monitoring

12/ton that a scenario with an active CCS sector (including R&D) becomes optimal, though not in the near future.

Income risk aversion with quantity constraints

This technical paper contains the proofs of all lemmata, propositions and other statements made in the paper Multidimensional screening in a monopolistic insurance market.

Redistribution and Small Coalitions of Friends

Abstract This paper studies the problem of Pareto efficient fiscal policies when labour supply is elastic and the government has no a priori information on income earned. The model is a two-class economy with an official and an unofficial labour market. Official income is taxed non-linearly, while unofficial income is only observable after a costly audit upon which it is taxed at an exogenous penalty rate. After characterisation of the Pareto efficient audit and tax policies, it is verified how these policies react to a higher government revenue requirement, an increase in the penalty rate, a stronger ambition to redistribute. In the two last scenarios, the effect on the marginal tax and the audit rate is shown to decompose into a government revenue effect and a substitution effect. A numerical example shows that the substitution effects are of minor importance, suggesting that first intuition about the best way for a government to cope with increased evasion opportunities— substituting auditing effort for high marginal tax rates—sketches only part of the picture.

Optimal Hospital Payment Rules Under Rationing by Random Waiting

In this paper, I consider a consumer with a concave utility function over n commodities and trace out the consequences of quantity constraints on product markets for the consumer’s aversion towards income risk. I show that the effect can be decomposed in a cardinal and ordinal term, that both terms may add up to a non-linear effct on the coefficient of relative risk aversion, and that a severely rationed consumer may even become less risk averse then when unconstrained.

Attitudes towards large income risk in welfare states: an international comparison.

When side marketing trade is perfect, linear taxation of retradeable commodities is the only scheme that survives attempts to arbitrage. In this paper, the author discusses tax schemes when side trading is imperfect in the sense that commodities can only be re-exchanged within coalitions no larger than two people. In the framework of a two-class economy, he identifies coalitions which might have an incentive to form and provide a characterization for the Pareto-efficient tax scheme. The tax formula has a very simple forma nd strongly resembles the formula for the no-side-trade case. In a numerical exercise, the constraints imposed on policy by an imperfect side trading process are found to be almost as tough as those imposed by perfect side trading. Copyright 1997 by The editors of the Scandinavian Journal of Economics.

Attitudes Towards Large Income Risk in Welfare States: An International Comparison

We derive optimal rules for paying hospitals in a public health care system in which providers can choose quality and random patient demand is rationed by waiting time. Since waiting time imposes real costs on patients hospital payment rules should take account of their e¤ect on waiting time as well as on quality and the number of patients treated. We develop a general stochastic model of rationing by waiting and use it to derive welfare maximising payment to hospitals linked to output, expected waiting times, quality, hospital capacity and length of stay. We show that, although prospective output pricing gives hospitals an incentive to attract patients by raising quality and reducing waiting times, it must be supplemented by prices attached to other hospital decisions and outcomes except under very strong assumptions about the welfare function, patient preferences, and whether patients lose income whilst waiting.

THE GAME FORM APPROACH TO REDISTRIBUTION

Using survey data and the instrument developed by Barsky et al. (), we estimate the distribution of attitudes towards income risk in a country where many employment and health‐related risks are generously covered by a tax‐financed social insurance system (Norway in 2006). Under a constant relative risk aversion assumption, the sample average for the coefficient of relative risk aversion is 3.8 with standard deviation 2.3. This number is then contrasted to that for five other OECD countries where risk attitudes have been measured using the same instrument and also prior to the financial crisis: Chile, France, Italy, the Netherlands and the USA. When we relate this distribution for stated relative risk aversion to that for generosity of social insurance and the risks related to employment and health expenditure, a picture emerges suggesting that more extensive welfare states induce higher risk tolerance for foreground risks—a relationship that is in line with the theory on risk vulnerability.