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This dissertation consists of three substantive essays on public economics, each corresponding to a chapter. In the first essay, a two-sector search model of labour market where in the one sector firms evade profit taxes (underground economy) is developed. A comparative static analysis has been employed in order to test the impact of cOIporate taxation on unemployment, occupational choice ofindividuals, mix of jobs, welfare of agents and the size of infOIDlal sector. The findings suggest that profit, severance (firing) and payroll taxation have the same effects on the above economic variables. However, if a condition which connects the elasticity of the arrival rate of jobs with respect to labour market tightness, with the rate of the elasticities of labour market tightness and of the fraction of vacancies in the fOIDlal sector with respect to corporate taxation does not hold, then the number of individuals searching for jobs only in the informal sector decreases with profit taxes. Moreover, if the aforementioned condition holds, then the welfare ofthe underground sector 'oriented' individuals (search only for informal sector jobs) increases with corporate taxation. In the second essay, an extension of the traditional Roy model so as to incorporate the existence of search frictions is proposed. Then the efficiency of model is tested under the existence of the standard Hosios condition. The results show that a new kind of externality whichis relatedwith the match acceptance probabilities arises and therefore Hosios condition fails to guarantee efficiency. Policies which subsidize employment and aim at the job specialization ofindividuals, Win equate the social with the private market outcome. Finally, the third essay study the effect of tax competition on the level of taxes and on the provision ofpublic goods. More specifically, a simple interregional model is constructed. One ofthe regions has zerttaxes and therefore does not provide public goods. This region can be characterized as a rural area. Our analysis show that the income differentials of the individuals who choose to live and work in the zero tax region influence the result of tCl:X competition. If there is (no) income inequality in the rural population then tax competition leads to inefficiently high (low) taxes and overprovision (undeIprovision) of public good. Moreover when there are no wage differentials among rural workers and the wage they receive is relatively low, then policies which aim at their specialization will reduce rural depopulation.

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