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Fiscal Policy with Heterogeneous Agents and Incomplete Markets

Jonathan Heathcote ()

Working Papers from Georgetown University, Department of Economics

Abstract: I undertake a quantitative investigation into the short run effects of changes in the timing of proportional income taxes for model economies in which heterogeneous households face a borrowing constraint. Temporary tax changes are found to have large real effects. In the benchmark model, a temporary tax increase reduces aggregate consumption on impact by around 29 cents for every additional dollar of tax revenue raised. Comparing the benchmark incomplete markets model to a complete markets economy, income tax cuts provide a larger boost to consumption and a smaller investment stimulus when asset markets are incomplete

JEL-codes: E62 H24 H31 H63 (search for similar items in EconPapers)
Date: 2003-06-03
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Related works:
Journal Article: Fiscal Policy with Heterogeneous Agents and Incomplete Markets (2005) Downloads
Working Paper: Fiscal Policy with Heterogeneous Agents and Incomplete Markets (2001) Downloads
Working Paper: Fiscal Policy with Heterogeneous Agents and Incomplete Markets (1999) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:geo:guwopa:gueconwpa~03-03-23

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Roger Lagunoff Professor of Economics Georgetown University Department of Economics Washington, DC 20057-1036
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