Fitrady, Ardyanto, authorCutler, Harvey, advisorPena, Anita Alves, advisorMushinski, David, committee memberKroll, Stephan, committee member2007-01-032007-01-032014http://hdl.handle.net/10217/83739This dissertation investigates two important topics in economics. First, the impacts of spillovers of public goods on the potential benefits from decentralization in an urban economy. Second, the role of tax evasion and uncertainty on the optimal taxation for two-class economy. Theoretical model and numerical simulations are used to study the first topic in Chapter 2. The results from the numerical simulation shows that the spillover level has an impact on the potential gain of decentralization. The general results of the numerical simulations demonstrate that as the degree of spillovers increases, the potential gain of decentralization over centralization diminishes in both cases of metropolitan areas in developed and developing countries. These results celebrate Oates' decentralization theorem where decentralization is more beneficial when spillovers among jurisdictions are relatively low. However, the result also shows that the impact of the spillover level on the potential gain of decentralization varies across different levels of income vis-a-vis income inequality. It shows that a metropolitan area with lower mean income will be suffer more from the spillover than a metropolitan area with higher mean income. The numerical simulation also shows that a higher level of inequality amplifies the benefit of decentralization. It illustrates that the developed country--in this case the United States--that generally has higher income inequality, potentially gains more benefits from decentralization. Theoretical models are used in Chapter 3 to examine the importance of tax evasion in the optimal taxation theory that are built based on previous studies. Although one can find that most of the results are intuitive, the model shows that considering tax evasion and uncertainty is important in implementing tax policies, particularly in the process of setting the tax rates for income tax and sales tax. The income tax for the high-type individual will be higher as the degree of tax evasion increases and the income tax of the low-type individual decreases as the probability of being detected for the high-type increases, ceteris paribus. The result also shows that the optimal income tax rate for the low-type individual increases as the marginal utility of mimicking the low type or the marginal utility of income for the mimicker increases, ceteris paribus. In other words, income tax for the low-type will increase if the high type has more incentive to mimic the low-type.born digitaldoctoral dissertationsengCopyright and other restrictions may apply. User is responsible for compliance with all applicable laws. For information about copyright law, please see https://libguides.colostate.edu/copyright.decentralizationoptimal taxationpublic economicstaxationurban economicsText