Marcelo Arbex

A QUANTITATIVE ANALYSIS OF TAX ENFORCEMENT AND OPTIMAL MONETARY POLICY

This paper explores the consequences of tax enforcement policies for monetary policy. Agents may evade taxes by working in the informal sector, but they are detected with positive probability. Workers are rewarded with government benefits that are proportional to formal (taxed) work. When enforcement is imperfect and collecting taxes is costly, the optimal inflation rate is positive and inflation becomes a second-best tax. Deviations from the Friedman rule are optimal and depend on the tax enforcement policies. Using U.S. data, we compute the quantitative effect of different tax structures on inflation and interest rate. We show that different tax enforcement and government spending (benefits) policies induce different optimal outcomes for inflation and interest rates.

OPTIMAL TAXATION AND SOCIAL NETWORKS

We study optimal taxation when jobs are found through a social network. The network determines employment, which workers may influence by engaging in social activities. The network parameters play an important role in determining the economys employment level and the optimal income tax. The optimal labor income tax depends on both the traditional intensive margin of labor supply and a new extensive margin that depends on the structure of the social network. Social activities that promote social connections are instrumental to acquiring job information; taxation thus discourages both social activities and labor supply, reducing employment. Labor taxes vary positively with labor supply and negatively with employment. When networking is absent, taxes are higher and the economys employment rate is lower. The optimal capital tax rate is zero, independent of labor market frictions. Social networking reduces job search frictions and is welfare-enhancing.

Asymmetric effects of shocks on TFP

ABSTRACT We study the TFP distribution and examine the non-stationarity of productivity series at various quantiles. Using the quantile autoregression unit root test, we find that the US TFP exhibits an asymmetric adjustment dynamics, that is, positive and negative shocks might have different (permanent or temporary) effects on the TFP. Shocks dissemination depends on the local behaviour of the TFP. We find that positive shocks have permanent effects on the TFP, while negative shocks can potentially have only transitory effects.