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This paper deals with optimal nonlinear taxation of labor and entrepreneurial income and extends the recent study of Scheuer (2014) to accommodate equilib- rium unemployment. We find that even if employment is endogenous, the govern- ment can achieve redistribution of income through taxation without distorting production efficiency. This is possible if the government taxes entrepreneurial and labor income separately. The results also show that including involuntary unem- ployment creates an incentive to tax entrepreneurial income at lower marginal rates and labor income at higher marginal rates than otherwise.

Chapter [I] analyses the dynamic properties of life-cycle earnings of men and women in Sweden by fitting a model to the covariance structure of earnings. We find that the financial crisis of 2008 did not have any major impact on the variability of earnings and that the upward trend in permanent earnings inequality observed in Sweden during the 1990s does not continue in the 2000s. Using the model to simulate the accumulation of income pension entitlements, we find that college-educated workers have smaller variations in pension entitlements than workers with less education. Chapter [II] presents a life-cycle earnings dynamics model that includes endogenous employment and job change. The model is estimated on Swedish register data using indirect inference. By simulating data from this model, we study the macroeconomic consequences of transitory shocks to unemployment risk, how unemployment at different ages affects the accumulation of pension entitlements, and analyze how different factors contribute to earnings inequality. We find that transitory aggregate shocks to unemployment risk have long-lasting negative effects on employment and earnings, that becoming unemployed at age 40 has a large negative effect on pension accumulations, and that unobserved individual heterogeneity contributes substantially to the observed life-cycle earnings inequality for both men and women in Sweden. Chapter [III] presents a model of earnings dynamics that includes transitions in and out of employment and business cycle fluctuations. The model is estimated using indirect inference and a mix of Swedish register, survey and macro data. We find that the transitions from unemployment to employment are more sensitive to business cycle fluctuations than the probability of remaining employed. By simulating data from the model, we find that the business cycle has a relatively small impact on earnings inequality in Sweden and that young workers are more sensitive to business cycle fluctuations than older workers. Chapter [IV] deals with optimal nonlinear taxation of income and profits in a general equilibrium model with frictional unemployment. We find that the government can achieve redistribution of income through taxation without distorting production efficiency. This outcome is possible if the government uses two nonlinear tax instruments, taxing profits and labor income separately. The results also show that including involuntary unemployment creates an incentive to tax entrepreneurial income at lower marginal rates and labor income at higher marginal rates than otherwise.

Although the idea of sustainable development is by now well established, discussions of how to progress from concept to reality often become mired in the complexities of global politics and offer few concrete solutions. While achieving sustainable development will undoubtedly require changes at the global level, the authors of this book emphasize that patterns of sustainable development must be built from the bottom up. They focus on methods for movement toward sustainability that can occur at the grassroots level. This book presents an integrated series of essays on the policies for sustainable development from one of the leading policy research institutes for environmental and developmental issues. It concentrates on the developing world and looks at the specific sectors to which policies must be applied. Beginning with a discussion of what constitutes sustainable development, it goes on to examine the institutional measures needed to mobilize human resources for change and the economic policies for sustainable natural-resource management. It then considers the policies needed in agriculture, urban development, industry, forests, drylands, energy use, finance, population, and consumption. The book ends with a discussion of the potential for financing new policy initiatives and the pressing need to reduce population growth and profligate consumption. Throughout, it demonstrates how those directly involved are best suited to manage their environments and resources. Policies for sustainable development depend upon the experience and resourcefulness of local people and require that they control their own futures