Endogenous Discounting, Wariness, and Effcient Capital Taxation

Aloisio Araujo, Juan Pablo Gamay, Rodrigo Novinskiz and Mario R. Pascoa
Additional contact information
Juan Pablo Gamay: IMPA
Rodrigo Novinskiz: Faculdades Ibmec
Mario R. Pascoa: University of Surrey

No 619, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: When the discount factors that infinite lived consumers use at each date are not predetermined but are instead chosen within some set, depending on what the consumption plan is, impatience might not hold. More precisely, if the utility is the infimum of discounted utilities over that set of discount factor sequences, then preferences may be just upper semi-impatient. Such lack of lower semi-impatience, which we refer to as wariness, consists in neglecting distant gains but not distant losses. Examples are the precautionary case (a concern with the worst lifetime outcome) and the habit persistence case (a concern with a fall in living standards). The implementation of efficient allocations by trading assets sequentially requires taxes that avoid excessive savings by raising the opportunity of cost of saving up to the point of matching the marginal benefit of dishoarding at distant dates. Taxes on equilibrium plans are zero in many contexts.

JEL-codes: D53 E40 E41 G10 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2019-03
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-upt
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://repec.som.surrey.ac.uk/2019/DP06-19.pdf (application/pdf)

Related works:
Journal Article: Endogenous discounting, wariness, and efficient capital taxation (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:0619

Access Statistics for this paper

More papers in School of Economics Discussion Papers from School of Economics, University of Surrey Contact information at EDIRC.
Bibliographic data for series maintained by Ioannis Lazopoulos ().