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Political Economy of Ramsey Taxation

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  • Daron Acemoglu
  • Mikhail 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 discount factor of the politician is equal to or greater than that of 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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15302.

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Date of creation: Aug 2009
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Publication status: published as Acemoglu, Daron & Golosov, Mikhail & Tsyvinski, Aleh, 2011. "Political economy of Ramsey taxation," Journal of Public Economics, Elsevier, vol. 95(7), pages 467-475.
Handle: RePEc:nbr:nberwo:15302

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Cited by:
  1. Aronsson, Thomas & Johansson-Stenman, Olof, 2013. "Publicly Provided Private Goods and Optimal Taxation when Consumers Have Positional Preferences," Working Papers in Economics, University of Gothenburg, Department of Economics 558, University of Gothenburg, Department of Economics.
  2. Micael Castanheira De Moura & Gaëtan Nicodème & Paola Profeta, 2012. "On the Political Economics of Tax Reforms: survey and empirical assessment," ULB Institutional Repository, ULB -- Universite Libre de Bruxelles 2013/136798, ULB -- Universite Libre de Bruxelles.
  3. 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.
  4. Yena Park, 2012. "Optimal Taxation in a Limited Commitment Economy," PIER Working Paper Archive, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania 12-033, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  5. Acemoglu, Daron & Golosov, Mikhail & Tsyvinski, Aleh, 2011. "Power fluctuations and political economy," Journal of Economic Theory, Elsevier, Elsevier, vol. 146(3), pages 1009-1041, May.
  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, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne 12094, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  7. repec:hal:journl:halshs-00786075 is not listed on IDEAS
  8. Castanheira, Micael & Nicodème, Gaëtan & Profeta, Paola, 2011. "On the political economics of tax reforms," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8507, C.E.P.R. Discussion Papers.
  9. Manuel Amador & Mark Aguiar, 2011. "Fiscal Policy in Debt Constrained Economies," 2011 Meeting Papers, Society for Economic Dynamics 527, Society for Economic Dynamics.
  10. Dai, Darong, 2013. "Cooperative economic growth," Economic Modelling, Elsevier, Elsevier, vol. 33(C), pages 407-415.

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