@TechReport{iza:izadps:dp11600,
            	author={Chugh, Sanjay K. and Lechthaler, Wolfgang and Merkl, Christian},
            	title={Optimal Fiscal Policy with Labor Selection},
            	year={2018},
	month={Jun},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={11600},
            	url={https://www.iza.org/publications/dp11600},
	abstract={This paper characterizes long-run and short-run optimal fiscal policy in the labor selection framework. In a calibrated non-Ramsey decentralized equilibrium, labor market volatility is inefficient. Keeping fixed the structural parameters, the Ramsey government achieves efficient labor market volatility; doing so requires labor-income tax volatility that is orders of magnitude larger than the "tax-smoothing" results based on Walrasian labor markets, but a few times smaller than the results based on search and matching markets. We analytically characterize selection-model-consistent wedges and inefficiencies in order to understand optimal tax volatility.},
	keywords={labor market frictions;hiring costs;efficiency;optimal taxation;labor wedge;zero intertemporal distortions},
            }