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Political economy of Ramsey taxation

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  • Acemoglu, Daron
  • Golosov, Mikhail
  • Tsyvinski, Aleh

Abstract

We study the dynamic taxation of capital and labor in the Ramsey model under the assumption that taxes and public good provision are decided by a self-interested politician who cannot commit to policies. We show that, as long as the politician is as patient as the citizens, the Chamley–Judd result of zero long-run taxes holds. In contrast, if the politician is less patient than the citizens, the best (subgame perfect) equilibrium from the viewpoint of the citizens involves long-run capital taxation.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 95 (2011)
Issue (Month): 7 ()
Pages: 467-475

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Handle: RePEc:eee:pubeco:v:95:y:2011:i:7:p:467-475

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Web page: http://www.elsevier.com/locate/inca/505578

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Keywords: Capital taxation; Fiscal policy; Political economy;

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Citations

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Cited by:
  1. Castanheira, Micael & Nicodème, Gaëtan & Profeta, Paola, 2011. "On the political economics of tax reforms," CEPR Discussion Papers 8507, C.E.P.R. Discussion Papers.
  2. Daron Acemoglu & Michael Golosov & Aleh Tsyvinski, 2009. "Power Fluctuations and Political Economy," EIEF Working Papers Series 0911, Einaudi Institute for Economics and Finance (EIEF), revised Sep 2009.
  3. Manuel Amador & Mark Aguiar, 2011. "Fiscal Policy in Debt Constrained Economies," 2011 Meeting Papers 527, Society for Economic Dynamics.
  4. Micael Castanheira & Gaëtan Nicodème & Paola Profeta, 2012. "On the Political Economics of Tax Reforms: survey and empirical assessment," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS 2012-08-ccr, Condorcet Center for political Economy.
  5. Aronsson, Thomas & Johansson-Stenman, Olof, 2013. "Publicly Provided Private Goods and Optimal Taxation when Consumers Have Positional Preferences," Working Papers in Economics 558, University of Gothenburg, Department of Economics.
  6. Dai, Darong, 2012. "Comparative Studies on Cooperative Stochastic Differential Game and Dynamic Sequential Game of Economic Maturity," MPRA Paper 44339, University Library of Munich, Germany.
  7. repec:hal:journl:halshs-00786075 is not listed on IDEAS
  8. Yena Park, 2012. "Optimal Taxation in a Limited Commitment Economy," PIER Working Paper Archive 12-033, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  9. Dai, Darong, 2013. "Cooperative economic growth," Economic Modelling, Elsevier, vol. 33(C), pages 407-415.
  10. Gaël Giraud & Myrna Wooders, 2012. "On the Simultaneous Emergence of Money and the State," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00786075, HAL.

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