Essays in public finance

The first essay attempts to establish that it may be possible to increase the government's resources, using taxes (and subsidies) on the returns from financial assets, without hurting investors. The set of taxes is simple but realistic. The returns from an asset are taxed at a proportional rate. Different assets can potentially be taxed at different rates. All investors face an identical set of tax rates. It is not assumed that the government can tax every asset.; The second essay investigates the optimal government insurance payment and the income tax, when unemployed workers are uncertainty averse toward the probability of finding a job and when the government cannot control the level of their savings. The optimal amount of the insurance payment and the tax rate are different from those when they are not uncertainty averse and/or they cannot save. In general, there is more consumption smoothing under uncertainty. Hence, the results in this paper cast some doubt on the steep insurance payment profile which many economists have proposed due to the moral hazard problem.; The third essay considers a risk premium and a risk free rate puzzle in Japan and the U.S. when investors behave according to the Knightian uncertainty. I was able to match more moments of risky and risk free returns when there is a small amount of the Knightian uncertainty than when there is no Knightian uncertainty. Besides, parameter values for the time preference and the risk aversion coefficient were plausible. Therefore, the Knightian uncertainty fares well in explaining the risk premium and the risk free rate puzzle.