Precautionary Saving and the Timing of Taxes
AbstractThis paper analyzes the effects of government debt and income taxes on consumption and saving in a world of infinitely lived house- holds having uncertain and heterogeneous incomes. The special structure of the model allows exact aggregation across households despite incomplete markets. The effects of government debt are shown to be substantial, roughly comparable to those resulting from finite horizons, and crucially dependent on the length of time until the debt is repaid. Also, anticipated changes in taxes are shown to cause anticipated changes in consumption. Finally, an index of fiscal stance is derived.
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Bibliographic InfoPaper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3443105.
Date of creation: 1989
Date of revision:
Publication status: Published in Journal of Political Economy -Chicago-
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