Fiscal Policy with Intertemporally Non-Separable Preferences

Luca Bossi and Pedro Gomis-Porqueras

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: In this paper, we show that Ricardian equivalence does not hold in a representative agent framework if one considers goods whose current consumption affect future marginal utilities. We find that, when the intertemporal elasticity of substitution changes over time, the timing of lump sum taxation has an asymmetric effect on current and future consumption. This in turn induces distinctive welfare consequences even if the government and individual budget constraints are unchanged in present value terms.

JEL-codes: H3 H5 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2010-04
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Citations: View citations in EconPapers (2)

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Working Paper: FISCAL POLICY WITH INTERTEMPORALLY NON-SEPARABLE PREFERENCES (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2010-14

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