Social discounting and incentive compatible fiscal policy

Catarina Reis ()

Journal of Economic Theory, 2012, vol. 147, issue 6, 2469-2482

Abstract: This paper considers a representative agent model of linear capital and labor income taxation in which the government cannot commit ex-ante to a sequence of policies for the future. In this setup, if the government is more impatient than the households, the capital income tax will be positive in steady state. Thus, impatience and lack of commitment are able to generate positive capital taxes in the long run, although each of these characteristics individually was not. Furthermore, the steady state to which the economy converges is independent of initial conditions.

Keywords: Fiscal policy; Optimal taxation; Incidence; Debt (search for similar items in EconPapers)
JEL-codes: E62 H21 H22 H63 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Social Discounting and Incentive Compatible Fiscal Policy (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:147:y:2012:i:6:p:2469-2482

DOI: 10.1016/j.jet.2012.09.001

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