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Political economy of Ramsey taxation

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Listed author(s):
  • Acemoglu, Daron
  • Golosov, Mikhail
  • Tsyvinski, Aleh

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 politician is as patient as 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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File URL: http://www.sciencedirect.com/science/article/pii/S004727271000157X
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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 95 (2011)
Issue (Month): 7 ()
Pages: 467-475

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Handle: RePEc:eee:pubeco:v:95:y:2011:i:7:p:467-475
DOI: 10.1016/j.jpubeco.2010.10.014
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

Keywords: Capital taxation; Fiscal policy; Political economy;

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Find related papers by JEL classification:
  • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
  • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
  • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
  • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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