Tag Archives: General equilibrium

Journal of Monetary Economics, with Martin Gonzalez-Eiras. PDF. (Appendix: PDF.) We propose a theory of tax centralization in politico-economic equilibrium. Taxation has dynamic general equilibrium implications which are internalized at the federal, but not at the regional level. The political support for taxation therefore differs across levels of government. Complementarities on the spending side decouple the equilibrium composition of spending and taxation and create a role for...

Accepted for publication in the Journal of Monetary Economics, with Martin Gonzalez-Eiras. PDF. (Appendix: PDF.) We propose a theory of tax centralization in politico-economic equilibrium. Taxation has dynamic general equilibrium implications which are internalized at the federal, but not at the regional level. The political support for taxation therefore differs across levels of government. Complementarities on the spending side decouple the equilibrium composition of spending and...

Accepted for publication in the Journal of Monetary Economics, with Martin Gonzalez-Eiras. PDF. (Appendix: PDF.) We propose a theory of tax centralization in politico-economic equilibrium. Taxation has dynamic general equilibrium implications which are internalized at the federal, but not at the regional level. The political support for taxation therefore differs across levels of government. Complementarities on the spending side decouple the equilibrium composition of spending and...

University of Copenhagen, Department of Economics Discussion Paper 17-18, July 2017, with Martin Gonzalez-Eiras. PDF. We propose a theory of tax centralization and intergovernmental grants in politico-economic equilibrium. The cost of taxation differs across levels of government because voters internalize general equilibrium effects at the central but not at the local level. The equilibrium degree of tax centralization is determinate even if expenditure-related motives for centralization...

On VoxEU, Steven Durlauf offers an excellent overview over Kenneth Arrow’s work. Durlauf emphasizes five areas of research: The impossibility theorem, in the tradition of Condorcet. General equilibrium theory and the welfare theorems, in the tradition of Walras. Decision-making under uncertainty, the Arrow-Pratt measures of risk aversion and contingent commodities. Imperfect information, in the context of medical care and as a source of statistical discrimination. Economics of knowledge,...

In his blog A Fine Theorem, Kevin Bryan discusses the history of economic thought leading from the classical economists and Walras to Arrow and Debreu. My read of the literature on GE following Arrow is as follows. First, the theory of general equilibrium is an incredible proof that markets can, in theory and in certain cases, work as efficiently as an all-powerful planner. That said, the three other hopes of general equilibrium theory since the days of Walras are, in fact, disproven by...

In the FT, Tim Harford (here) and Martin Sandbu (here) review Kenneth Arrow’s monumental contributions to economics.

VoxEU, October 11, 2016, with Martin Gonzalez-Eiras. HTML. The US fiscal system underwent a radical transformation around the time of the Great Depression. Perceived cost differences of revenue collection across levels of government, due to general equilibrium effects, can partly explain the rise of tax centralization and intergovernmental grants. We develop a micro-founded general equilibrium model that blends politics and macroeconomics. (See the working paper.)

CEPR Discussion Paper 11482, August 2016, with Martin Gonzalez-Eiras. PDF. Also published as CESifo Working Paper 6062, Study Center Gerzensee Working Paper 16-05. PDF, PDF. We propose a theory of tax centralization and inter governmental grants in politico-economic equilibrium. The cost of taxation differs across levels of government because voters internalize general equilibrium effects at the central but not at the local level. This renders the degree of tax centralization and the tax...