Do taxspots matter?

A. Citanna and M. Tvede

Journal of Economic Theory, 2024, vol. 220, issue C

Abstract: Should the government run an uncertain fiscal policy to finance its liabilities? We call the resulting uncertainty taxspots, and study conditions that make taxspots optimal and recurrent in standard Ramsey problems. We show that prudence and market incompleteness play a role in sustaining taxspots, and that equal-treatment randomizations can be decentralized via taxspots even in the absence of financial markets.

Keywords: Ramsey taxation; Sunspots; Lottery equilibrium (search for similar items in EconPapers)
JEL-codes: D51 D52 D84 E62 H21 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:220:y:2024:i:c:s0022053124000905

DOI: 10.1016/j.jet.2024.105884

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