"Optimal Policy and (the Lack of) Time Inconsistency: Insights from Simple Models"

In the standard neoclassical model with a representative agent, a benevolent planner who can commit to future policies will, if feasible, levy a single confiscatory tax on capital in the initial period and commit never to set positive taxes thereafter. We show that this policy, which allows for the disposal of distortional taxes entirely, can arise even when sequential governments are unable to credibly promise future tax rates, regardless of how public expenditures are determined.

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Year of publication:	2006
Authors:	Jorge Soares, Marina Azzimonti, Pierre-Daniel Sarte ; Sarte, Pierre-Daniel ; Soares, Jorge
Institutions:	Department of Economics, Lerner College of Business and Economics
Subject:	Capital Taxation \| Ramsey \| Commitment \| Markov-Perfect equilibrium \| Time consistent policy \| Overlapping Generations

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Extent:	application/pdf
Series:	Working Papers.
Type of publication:	Book / Working Paper
Notes:	Number 06-08 39 pages
Classification:	H3 - Fiscal Policies and Behavior of Economic Agents ; H6 - National Budget, Deficit, and Debt ; H21 - Efficiency; Optimal Taxation ; E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005063523