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 Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2010-14.
Length: 14 pages
Date of creation: Apr 2010
Date of revision:
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Other versions of this item:
- Pedro Gomis Porqueras & Luca Bossi, 2010. "Fiscal Policy With Intertemporally Non-Separable Preferences," ANU Working Papers in Economics and Econometrics 2010-512, Australian National University, College of Business and Economics, School of Economics.
- H5 - Public Economics - - National Government Expenditures and Related Policies
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
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