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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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Bibliographic Info

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. 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.
  2. 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.
  3. Castanheira, Micael & Nicodème, Gaëtan & Profeta, Paola, 2011. "On the political economics of tax reforms," CEPR Discussion Papers 8507, C.E.P.R. Discussion Papers.
  4. 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.
  5. 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.
  6. Dai, Darong, 2013. "Cooperative economic growth," Economic Modelling, Elsevier, vol. 33(C), pages 407-415.
  7. repec:hal:journl:halshs-00786075 is not listed on IDEAS
  8. Daron Acemoglu & Mikhail Golosov & Aleh Tsyvinski, 2009. "Power Fluctuations and Political Economy," NBER Working Papers 15400, National Bureau of Economic Research, Inc.
  9. 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.
  10. Mark A. Aguiar & Manuel Amador, 2011. "Fiscal Policy in Debt Constrained Economies," NBER Working Papers 17457, National Bureau of Economic Research, Inc.

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