Fiscal Policy With Intertemporally Non-Separable Preferences
AbstractIn this paper, we show that Ricardian equivalence does not hold in a representative agent framework if one considers goods whose current consumption affect future marginal utilities. We find that, when the intertemporal elasticity of substitution changes over time, the timing of lump sum taxation has an asymmetric effect on current and future consumption. This in turn induces distinctive welfare consequences even if the government and individual budget constraints are unchanged in present value terms.
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Bibliographic InfoPaper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2010-512.
Length: 13 Pages
Date of creation: Feb 2010
Date of revision:
Other versions of this item:
- Luca Bossi & Pedro Gomis Porqueras, 2010. "Fiscal Policy with Intertemporally Non-Separable Preferences," CAMA Working Papers 2010-14, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
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