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Political Economy of Ramsey Taxation

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  • Daron Acemoglu
  • Michael Golosov
  • Aleh Tsyvinski

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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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 122247000000002192.

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Date of creation: 09 Jun 2008
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Handle: RePEc:cla:levarc:122247000000002192

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Cited by:
  1. Darong DAI & Jun YIN, 2013. "Comparative Studies On Cooperative Stochastic Differential Game And Dynamic Sequential Game Of Economic Maturity," Theoretical and Practical Research in Economic Fields, ASERS Publishing, vol. 0(1), pages 25-60, July.
  2. 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.
  3. Manuel Amador & Mark Aguiar, 2011. "Fiscal Policy in Debt Constrained Economies," 2011 Meeting Papers 527, Society for Economic Dynamics.
  4. Castanheira, Micael & Nicodème, Gaëtan & Profeta, Paola, 2011. "On the political economics of tax reforms," CEPR Discussion Papers 8507, C.E.P.R. Discussion Papers.
  5. repec:hal:journl:halshs-00786075 is not listed on IDEAS
  6. Daron Acemoglu & Mikhail Golosov & Aleh Tsyvinski, 2009. "Power Fluctuations and Political Economy," NBER Working Papers 15400, National Bureau of Economic Research, Inc.
  7. 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.
  8. 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.
  9. Dai, Darong, 2013. "Cooperative economic growth," Economic Modelling, Elsevier, vol. 33(C), pages 407-415.
  10. 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.

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