Time-consistent Fiscal Policy under Heterogeneity: Conflicting or Common Interests?

Konstantinos Angelopoulos (), Jim Malley and Apostolis Philippopoulos

No 3444, CESifo Working Paper Series from CESifo

Abstract: This paper studies the aggregate and distributional implications of Markov-perfect tax-spending policy in a neoclassical growth model with capitalists and workers. Focusing on the long run, our main findings are: (i) it is optimal for a benevolent government, which cares equally about its citizens, to tax capital heavily and to subsidise labour; (ii) a Pareto improving means to reduce inefficiently high capital taxation under discretion is for the government to place greater weight on the welfare of capitalists; (iii) capitalists and workers preferences, regarding the optimal amount of "capitalist bias", are not aligned implying a conflict of interests.

Keywords: optimal fiscal policy; Markov-perfect equilibrium; heterogeneous agents (search for similar items in EconPapers)
JEL-codes: E62 H21 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Time-consistent fiscal policy under heterogeneity: conflicting or common interests? (2011)
Working Paper: Time-consistent fiscal policy under heterogeneity: Conflicting or common interests? (2011)
Working Paper: Time-consistent fiscal policy under heterogeneity: Conflicting or common interests? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3444

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