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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. Micael Castanheira & Gaëtan Nicodème & Paola Profeta, 2012. "On the political economics of tax reforms: survey and empirical assessment," International Tax and Public Finance, Springer, vol. 19(4), pages 598-624, August.
  2. Acemoglu, Daron & Golosov, Mikhail & Tsyvinski, Aleh, 2011. "Power fluctuations and political economy," Journal of Economic Theory, Elsevier, vol. 146(3), pages 1009-1041, May.
  3. 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.
  4. Mark A. Aguiar & Manuel Amador, 2011. "Fiscal Policy in Debt Constrained Economies," NBER Working Papers 17457, National Bureau of Economic Research, Inc.
  5. 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.
  6. Gaël Giraud & Myrna Wooders, 2012. "On the Simultaneous Emergence of Money and the State," Documents de travail du Centre d'Economie de la Sorbonne 12094, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  7. Dai, Darong, 2013. "Cooperative economic growth," Economic Modelling, Elsevier, vol. 33(C), pages 407-415.
  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. repec:hal:journl:halshs-00786075 is not listed on IDEAS

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