TY - JOUR
T1 - Dynamic Mirrlees Taxation under Political Economy Constraints
AU - Acemoglu, Daron
AU - Golosov, Mikhail
AU - Tsyvinski, Aleh
N1 - Funding Information:
Then we can proceed as in Theorem 4 to yield the conclusions in the theorem. In particular, when ϕ = δ, then we must have µt∗ → µ∗ and distortions disappear. If, on the other hand, ϕ > δ, µt+1∗ > µt∗ and those ψt > 0 as t → ∞ and asymptotic distortions remain. ‖ Acknowledgements. We thank two anonymous referees, the editor, Kjetil Storesletten, and audiences at many seminars for helpful comments and suggestions, and Georgy Egorov and Oleg Itskhoki for excellent research assistance. All three authors gratefully acknowledge financial support from the National Science Foundation.
PY - 2010/7
Y1 - 2010/7
N2 - We study the structure of non-linear taxes in a dynamic economy subject to political economy problems. In contrast to existing literature, taxes are set by a self-interested politician, without any commitment power, who is partly controlled by the citizens. We prove that: (1) a version of the revelation principle applies; and (2) the provision of incentives to politicians can be separated from the provision of incentives to individuals. Using these results, we provide conditions under which distortions created by political economy problems persist or disappear. We then extend these results to environments with partially benevolent governments and potential ex post conflict among the citizens.
AB - We study the structure of non-linear taxes in a dynamic economy subject to political economy problems. In contrast to existing literature, taxes are set by a self-interested politician, without any commitment power, who is partly controlled by the citizens. We prove that: (1) a version of the revelation principle applies; and (2) the provision of incentives to politicians can be separated from the provision of incentives to individuals. Using these results, we provide conditions under which distortions created by political economy problems persist or disappear. We then extend these results to environments with partially benevolent governments and potential ex post conflict among the citizens.
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U2 - 10.1111/j.1467-937X.2009.00587.x
DO - 10.1111/j.1467-937X.2009.00587.x
M3 - Article
AN - SCOPUS:77954074828
SN - 0034-6527
VL - 77
SP - 841
EP - 881
JO - Review of Economic Studies
JF - Review of Economic Studies
IS - 3
ER -