A Dynamic Model of Fiscal Reconstruction
AbstractThis paper investigates dynamic properties of fiscal reconstruction by analysing the infinite duration dynamic game among various interest groups with a framework of voluntary acceptance of tax burden. By comparing the first best solution, the open-loop solution under enforceable commitments, and the closed-loop solution without commitment, we explore the free riding aspect of fiscal reconstruction process and investigate the normative role of consumption taxes to internalize the free riding problem. We also derive explicitly the adjustment speeds of fiscal reconstruction under alternative solutions and examine the impact of consumption taxes on the adjustmet speed.
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Bibliographic InfoPaper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number 97-F-15.
Length: 36 pages
Date of creation: Apr 1997
Date of revision:
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