Intertemporal Distortions in the Second Best

Stefania Albanesi () and Roc Armenter ()

No 0708-08, Discussion Papers from Columbia University, Department of Economics

Abstract: We consider a very general class of public finance problems that encompasses Ramsey models of optimal taxation as well as economies with limited commitment, private information, and political economy frictions. We identify a sufficient condition to rule out permanent intertemporal distortions at the optimum: If there exists an admissible allocation that converges to the first best steady state, then all intertemporal distortions are temporary in the second best. We analyze a series of applications to illustrate the significance of this result.

New Economics Papers: this item is included in nep-dge
Date: 2007
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Related works:
Working Paper: Intertemporal Distortions in the Second Best (2007)
Working Paper: Intertemporal Distortions in the Second best (2007)
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