Optimal Government Policies in Models with Heterogeneous Agents
AbstractWe develop a new methodology for finding optimal government policies in economies with heterogeneous agents. The methodology is solely based on three classes of equilibrium conditions from the government's and individual agent's optimization problems: 1) the first order conditions; 2) the stationarity condition on the distribution function; and, 3) the aggregate market clearing conditions. The solution takes into account simultaneously the effect of government policy on individual allocations and (from the government's point of view) optimal distribution of agents in the steady state. We illustrate it on a steady state Ramsey problem with heterogeneous agents, finding the optimal tax schedule.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 651.
Date of creation: 2007
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Other versions of this item:
- Radim Bohacek & Michal Kejak, 2005. "Optimal Government Policies in Models with Heterogeneous Agents," CERGE-EI Working Papers wp272, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- D30 - Microeconomics - - Distribution - - - General
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
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