Related papers: Bailouts and Redistribution
I study the optimal regulation of a financial sector where individual banks face self-enforcing constraints countering their default incentives. The constrained-efficient social planner can improve over the unregulated equilibrium in two…
This paper analyzes whether a minimum wage should be used for redistribution on top of taxes and transfers. I characterize optimal redistribution for a government with three policy instruments -- labor income taxes and transfers, corporate…
This paper studies how household heterogeneity affects the level and cyclical behavior of the optimal carbon tax in a real economy. We demonstrate that an equity-efficiency trade-off arises due to income inequality and heterogeneity in the…
We introduce a highly stylized, yet non trivial model of the economy, with a public and private sector coupled through a wealth tax and a redistribution policy. The model can be fully solved analytically, and allows one to address the…
In the so-called ``fair'' models of peer-to-peer wealth exchanges, economic inequality tends to reach its maximum value asymptotically. This global trend is evident as the richest continuously accumulate a larger share of wealth at the…
I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…
We study the optimal financing and dividend distribution problem with restricted dividend rates in a diffusion type surplus model where the drift and volatility coefficients are general functions of the level of surplus and the external…
We study economies where consumers interact independently with many monopolists. When consumer valuations over goods are correlated, correlation can distort the induced distribution of consumer surplus (information rents). We identify which…
This paper analyzes the equilibrium distribution of wealth in an economy where firms' productivities are subject to idiosyncratic shocks, returns on factors are determined in competitive markets, dynasties have linear consumption functions…
Effective risk control must make a tradeoff between the microprudential risk of exogenous shocks to individual institutions and the macroprudential risks caused by their systemic interactions. We investigate a simple dynamical model for…
Simple agent based exchange models are a commonplace in the study of wealth distribution in an artificial economy. Generally, in a system that is composed of many agents characterized by their wealth and risk-aversion factor, two agents are…
International taxation rules are outdated, allowing multinationals to shift profits to tax havens. This paper examines how tax reforms affect profit shifting and cross-country welfare. We propose a model that separates real economic profits…
In economic modeling, there has been an increasing investigation into multi-agent simulators. Nevertheless, state-of-the-art studies establish the model based on reinforcement learning (RL) exclusively for specific agent categories, e.g.,…
I study the welfare-maximizing allocation of heterogeneous goods when monetary transfers are prohibited. Agents have private values, and the designer chooses a mechanism subject to incentive compatibility and aggregate supply constraints. I…
The optimal taxation of assets requires attention to two concerns: 1) the elasticity of the supply of assets and 2) the impact of taxing assets on distributional objectives. The most efficient way to attend to these two concerns is to tax…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
Default risk significantly affects the corporate policies of a firm. We develop a model in which a limited liability entity subject to Poisson default shock jointly sets its dividend policy and capital structure to maximize the expected…
We study the Merton problem of optimal consumption-investment for the case of two investors sharing a final wealth. The typical example would be a husband and wife sharing a portfolio looking to optimize the expected utility of consumption…
Wealth taxes are a frequently proposed policy within the post-growth literature, but evaluations of their alignment with post-growth goals, and empirical estimates of their potential effects, are lacking. We contribute to this literature by…
We use a simple agent based model of value investors in financial markets to test three credit regulation policies. The first is the unregulated case, which only imposes limits on maximum leverage. The second is Basle II and the third is a…