Optimal Intertemporal Taxation and the Public Debt

Christophe Chamley ()

No 554, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: The optimal taxation problem is analyzed in a general equilibrium model of optimal growth. The private sector is represented by a single competitive household endowed with perfect foresight, and an infinite life. This household maximizes an intertemporal stationary utility function. Public consumption is financed by taxes on consumption, labor income and capital income (or wealth), or by borrowing. Different policies (first-best and second-best), are analyzed for various subsets of instruments. The problem of the optimal level of the public debt is also considered. The general conclusion supports the relative efficiency of the consumption tax with respect to the other instruments.

Pages: 53 pages
Date: 1980-04
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Citations: View citations in EconPapers (6)

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