In this paper I study dynamic optimal taxation in a private information economy with continuum of individual productivity shocks that are persistent over time. I formulate the problem recursively and use first order approach to simplify it. I provide full justification of the first order approach. The advantage of the first order approach is twofold. First, as is well known, it simplifies the incentive compatibility constraint. Second, and this is a new feature in this model, it dramatically reduces the state space of the dynamic program. Instead of using the continuation utility function as a state, we use the marginal continuation utility as a state. This feature is extremely useful because it allows us to numericaly implement the dynamic program and solve quantitatively for the optimal allocations
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Paper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number
689.
Length: Date of creation: 2004 Date of revision: Handle: RePEc:red:sed004:689
Contact details of provider: Postal: Society for Economic Dynamics Anne Stubing CV Starr Center for Applied Economics 269 Mercer Street, Room 303 New York University New York, NY 10003 Fax: 1-860-486-4463 Email: Web page: http://www.EconomicDynamics.org/society.htm More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Christian Zimmermann).
Find related papers by JEL classification: E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)