IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Fiscal Policy as a Temptation Control Device

Listed author(s):
  • Chung Tran


We formulate an overlapping generations model with temptation and self-control preferences and incomplete market for commitment devices to study the role of two fiscal programs: social security and saving subsidy. In our environment, the distortions created by such fiscal programs work as a corrective tool that mitigates the adverse effect of succumbing to temptation on inter-temporal allocation and releases severity of self-control problem. Our results indicate that both fiscal programs potentially lead to welfare gains; however, the driving mechanisms are different. Welfare gains associated with a social security program result mainly from releasing self-control costs while welfare gains associated with a saving subsidy program are mainly driven by mitigating inter-temporal allocation distortion. In addition, we also find that the direction and size of welfare effects vary substantially when allowing for different tax-financing instruments as well as when accounting for general equilibrium price adjustments.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2012-595.

in new window

Length: 41 Pages
Date of creation: Nov 2012
Handle: RePEc:acb:cbeeco:2012-595
Contact details of provider: Postal:
Canberra, ACT 2601

Phone: +61 2 6125 3807
Fax: +61 2 6125 0744
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:acb:cbeeco:2012-595. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.