Political economy of Ramsey taxation

Daron Acemoglu, Mikhail Golosov, Aleh Tsyvinski

Research output: Contribution to journalArticlepeer-review

26 Scopus citations

Abstract

We study the dynamic taxation of capital and labor in the Ramsey model under the assumption that taxes and public good provision are decided by a self-interested politician who cannot commit to policies. We show that, as long as the politician is as patient as the citizens, the Chamley-Judd result of zero long-run taxes holds. In contrast, if the politician is less patient than the citizens, the best (subgame perfect) equilibrium from the viewpoint of the citizens involves long-run capital taxation.

Original languageEnglish (US)
Pages (from-to)467-475
Number of pages9
JournalJournal of Public Economics
Volume95
Issue number7-8
DOIs
StatePublished - Aug 2011

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Keywords

  • Capital taxation
  • Fiscal policy
  • Political economy

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