Intertemporal Distortions in the Second Best
Stefania Albanesi () and
Roc Armenter ()
Review of Economic Studies, 2012, vol. 79, issue 4, 1271-1307
This paper studies the long-run properties of intertemporal distortions in a broad class of second-best economies. Our unified framework encompasses and extends many well-known models, such as variants of the Ramsey taxation model with aggregate or idiosyncratic risk, and economies with incentive compatibility constraints due to limited commitment, political economy, self-enforcement or private information, or combinations of these. We identify a sufficient condition that rules out permanent intertemporal distortions: if there exists an allocation that satisfies all constraints and eventually converges to the limiting first-best allocation, then intertemporal distortions are temporary in the second best. This result uncovers a common optimality principle linking the intertemporal allocation of resources with the ability to front-load distortions for this broad class of environments. A series of applications illustrates the significance of these findings. Copyright , Oxford University Press.
References: Add references at CitEc
Citations View citations in EconPapers (6) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
Working Paper: Intertemporal Distortions in the Second Best (2007)
Working Paper: Intertemporal Distortions in the Second best (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:79:y:2012:i:4:p:1271-1307
Access Statistics for this article
Review of Economic Studies is currently edited by Andrea Prat, Bruno Biais, Kjetil Storesletten and Enrique Sentana
More articles in Review of Economic Studies from Oxford University Press
Bibliographic data for series maintained by Oxford University Press ().