Anticipation, learning and welfare: the case of distortionary taxation

Emanuel Gasteiger and Shoujian Zhang

MPRA Paper from University Library of Munich, Germany

Abstract: We study the impact of anticipated fiscal policy changes in the Ramsey economy when agents form expectations using adaptive learning. We extend the existing framework by distortionary taxes as well as elastic labour supply, which makes agents' decisions non-predetermined but more realistic. We detect that the dynamic responses to anticipated tax changes under learning have oscillatory behaviour. Moreover, we demonstrate that this behaviour can have important implications for the welfare consequences of fiscal reforms.

Keywords: Fiscal Policy; Adaptive Learning; Oscillations (search for similar items in EconPapers)
JEL-codes: D84 E32 E62 (search for similar items in EconPapers)
Date: 2011-04-18
New Economics Papers: this item is included in nep-dge and nep-mac
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Related works:
Journal Article: Anticipation, learning and welfare: the case of distortionary taxation (2014)
Working Paper: Anticipation, Learning and Welfare: the Case of Distortionary Taxation (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:30625

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