Rafael Aigner

Environmental Taxation and Redistribution Concerns
How is the optimal level of Pigouvian taxation influenced by distributive concerns? With second-best instruments, a higher level of income redistribution calls for a lower level of Pigouvian taxation. More redistribution implies higher distortions from income taxation. Pigouvian tax revenues become more valuable and the optimal level of environmental taxation decreases. With first-best instruments, however, the relation between levels of redistribution and Pigouvian taxation is reversed. So second-best Pigouvian taxes are very different from their first-best counterpart - despite apparently identical first order conditions.

The Fehmarn Belt Duopoly - Can the Ferry Compete with a Tunnel?
The Fehmarn Belt is a strait between Denmark and Germany, currently served by a ferry operator. We analyse competition between the ferry service and a planned tunnel, the Fehmarn Belt Fixed Link. We develop a differentiated duopoly model to address two questions: 1. Will the tunnel induce the ferry to exit the market once it operates? 2. Will the tunnel’s toll revenue suffice to cover its cost? Using real-world data and traffic forecasts, we show that it should not be taken for granted that the ferry will exit the market, and that if the ferry competes, the tunnel project will make a loss.

Investing Your Vote
Election thresholds in proportional election systems prevent small parties from entering parliament. Nevertheless, parties below the threshold often do get votes. We rationalize this behavior in a two-period model with aggregate uncertainty about whether a newly emerged party has sufficient support to pass the threshold. In equilibrium, passionate supporters of the new party vote for the party despite expecting the party to fail the threshold. Their votes can signal a strong backing in the population and increase the party’s chances to enter parliament at the next election.

Boring Banks and Taxes
How do taxes in the financial sector affect economic outcomes? We analyze a simple general equilibrium model with financial intermediation. We formalize a trade-off between tax policies that burden the owners of banks and tax policies that burden households. We also study the implications of the financial sector's exemption from value added taxation (VAT). Main results are that an increased taxation of the banks' profits goes together with a larger financial sector, as measured by the volume of loans and the employment in banking. We also show that the general presumption that the VAT-exemption is beneficial for banks is unjustified.