Equilibrium Welfare and Government Policy with Quasi-Geometric Discounting
Per Krusell (),
Burhanettin Kuruscu () and
Anthony Smith ()
No 413, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area
We consider a representative-agent equilibrium model where the consumer has quasi geometric discounting and cannot commit to future actions. We restrict attention to a parametric class for preferences and technology and solve for time-consistent competitive equilibria globally and explicitly. We then characterize the welfare properties of competitive equilibria and compare them to that of a planning problem. The planner is a consumer representative who, without commitment but in a time-consistent way, maximizes his presentvalue utility subject to resource constraints. The competitive equilibrium results in strictly higher welfare than does the planning problem whenever the discounting is not geometric.
Keywords: quasi-geometric discounting; markov equilibrium; taxation; time-consistent policy (search for similar items in EconPapers)
JEL-codes: E21 E61 (search for similar items in EconPapers)
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Journal Article: Equilibrium Welfare and Government Policy with Quasi-geometric Discounting (2002)
Working Paper: Equilibrium Welfare and Government Policy with Quasi-Geometric Discounting (2001)
Working Paper: Equilibrium Welfare and Government Policy with Quasi-Geometric Discounting
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_413_01
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