We study dynamic optimal taxation in a class of economies with private information. Optimal allocations in these environments are complicated and history-dependent. Yet, we show that they can be implemented as competitive equilibria in market economies supplemented with "simple" tax systems. The...

We study efficient non-linear taxation of labour and capital in a dynamic Mirrleesian model incorporating political economy constraints. Policies are chosen sequentially over time, without commitment. Our main result is that the marginal tax on capital income is progressive, in the sense that...

The Ramsey model of fiscal policy implies that taxes should be smooth in the sense of having small variances. In contrast, empirical labour tax processes are smooth in the sense of being random walks; they provide prima facie evidence for incomplete government insurance. This paper considers...

The Ramsey model of fiscal policy implies that taxes should be smooth in the sense of having small variances. In contrast, empirical labour tax processes are smooth in the sense of being random walks; they provide prima facie evidence for incomplete government insurance. This paper considers...

Why is inflation persistently high in some periods and low in others? The reason may be the absence of commitment in monetary policy. In a standard model, absence of commitment leads to multiple equilibria, or "expectation traps", even without trigger strategies. In these traps, expectations of...

Why is inflation persistently high in some periods and low in others? The reason may be the absence of commitment in monetary policy. In a standard model, absence of commitment leads to multiple equilibria, or expectation traps, even without trigger strategies. In these traps, expectations of...

This paper studies the long-run properties of intertemporal distortions in a broad class of second-best economies. Our unified framework encompasses and extends many well-known models, such as variants of the Ramsey taxation model with aggregate or idiosyncratic risk, and economies with...