Political Economy of Ramsey Taxation

Daron Acemoglu, Michael Golosov and Aleh Tsyvinski

No 15302, NBER Working Papers from National Bureau of Economic Research, Inc

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 discount factor of the politician is equal to or greater than that of 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.

JEL-codes: E6 E62 H21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pol
Date: 2009-08
Note: EFG PE POL

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Working Paper: Political Economy of Ramsey Taxation (2008)
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