time consistent public policy in this paper we study how a benevolent government that cannot commit to future policy should trade off the costs and benefits of public expenditure we characterize and solve for markov perfect equilibria of the dynamic game between successive governments the characterization consists of an inter temporal first order condition a generalized euler equation for the government and we use it both to gain insight into the nature of the equilibrium and as a basis for computations for a calibrated economy we find that when the only tax base available to the government is capital income an inelastic source of funds at any point in time the government still refrains from taxing at confiscatory rates we also find that when the only tax base is labour income the markov equilibrium features less public expenditure and lower tax rates than the ramsey equilibrium

representative democracy and capital taxation abstract in this paper we study a political model of capital taxation voters who differ in their relative shares of capital and labor income choose tax policy under majority rule we compare two political regimes direct democracy where the voters vote directly on the policy and representative democracy where they elect a representative who then chooses policy in both regimes some form of commitment by the voters is necessary to avoid excessive taxation of capital but the necessary commitment under representative democracy corresponds closely to that provided by the actual institutions of most democracies

obsolescence of knowledge and career publication profiles some evidence of differences among fields in costs of interrupted careers in recent years women have received about 45 percent of all baccalaureate degrees but only approximately 20 percent of all ph d s does this imply that academic careers as compared with careers of the wider market for college graduates are less conducive to dual career family objectives evidence suggesting the relative tradeoff of these objectives is shown by the fact that over the last thirty years the zero order correlation between average cohort fertility and the proportion of ph d recipients who are women is 0 939 a female recipient of a doctorate is twice as likely as a male recipient to have specialized in the humanities and only one third as likely to have specialized in a physical science field furthermore of those who receive a doctorate in physical science a male is 60 percent more likely than a female to pursue research as a primary work activity in the humanities on the other hand a woman is at least as likely as a man to have research as an initial postdoctoral work activity obviously many factors affect opportunities and resultant decisions to enter particular careers and to select specific occupational specialties this study considers only onethe rate of obsolescence or depreciation of knowledge as reflected in the age profile of cited works this measure of the obsolescence of knowledge refers to the rate of decay in the relative frequency at which citations are made to a particular vintage of research communications as the communications age in other words the usefulness of older published research papers as an input to current research depreciates over time the rate at which this depreciation occurs is interpreted as measuring the durability of a professor s accumulated stock of knowledge evidence presented in section ii indicates that the durability of knowledge varies considerably from discipline to discipline this information raises a number of questions concerning how the durability of knowledge influences career decisions one influence considered here is that of a temporary career interruption for example if a woman experiences a break in her academic career such as for the purpose of raising children she will incur an opportunity cost in the sense that her research knowledge will to some extent become obsolete consequently her accumulated stock of knowledge will decline relative to those professors who have continuous careers the relative cost imposed on a woman who pursues dual family career objectives is higher the less durable the jobrelated knowledge this difference in relative costs is expected to alter career incentives the results presented here suggest that women who pursue academic careers have responded to these incentives before discussing the evidence on female careers i consider a more general model in which a professor is assumed to have a continuous career profile this model which is more appropriately viewed as a male model of investment behavior is used to analyze how the durability of a professor s knowledge affects his research productivity over a career interestingly the evidence suggests that a professor s response to less durable knowledge is not to compact all learning early in his career but rather to smooth learning over the career perhaps the most assistant professor arizona state university i would like to thank an anonymous referee and many friends for helpful comments on earlier drafts i am especially indebted to finis welch for valuable suggestions throughout the development of this paper the views expressed are my own and i am responsible for any possible errors

taxing capital not a bad idea after all we quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic uninsurable income shocks and permanent productivity difierences of households the optimal capital income tax rate is signiflcantly positive at 36 percent the optimal progressive labor income tax is roughly a at tax of 23 percent with a deduction of 7 200 relative to average household income of 42 000 the high optimal capital income tax is mainly driven by the life cycle structure of the model whereas the optimal progressivity of the labor income tax is attributable to the insurance and redistribution role of the tax system jel e62 h21 h24

the limits of political compromise debt ceilings and political turnover we study the desirability of limits on the public debt and of political turnover in an economy where incumbents have an incentive to set public expenditures above the socially optimal level due to rent seeking motives parties alternate in office and cannot commit to future policies but they can forge a political compromise where each party curbs excessive spending when in office if it expects future governments to do the same in contrast to the received literature we find that strict limits on government borrowing can exacerbate political economy distortions by making a political compromise unsustainable this tends to happen when political turnover is limited conversely a tight limit on the public debt fosters a compromise that yields the efficient outcome if political turnover is vigorous our analysis thus suggests that to sustain good economic policies a society needs to restrict either the extent of political turnover or the ability of governments to issue debt but not both

social discounting and incentive compatible fiscal policy abstract this paper considers a representative agent model of linear capital and labor income taxation in which the government cannot commit ex ante to a sequence of policies for the future in this setup if the government is more impatient than the households the capital income tax will be positive in steady state thus impatience and lack of commitment are able to generate positive capital taxes in the long run although each of these characteristics individually was not furthermore the steady state to which the economy converges is independent of initial conditions

optimal taxes without commitment abstract in the problem of optimal taxation in an economy with labor and capital the optimal solution when the government can commit to a sequence of tax rates entails that the tax on capital tends to zero in the limit with all the tax burden on labor it is well known however that this solution is time inconsistent so if the commitment power is not perfect this second best tax plan will not be sustainable we model explicitly the trade off between the cost of revising the tax plan and the benefit of the revision as a result when commitment is not possible both the limit tax rate and the steady state capital are different from their levels in the second best solution limit taxes on capital may be strictly positive but it may also be the case that the only sustainable plan has subsidies to capital the subsidies induce an overaccumulation of capital which becomes a commitment device against revisions of the tax plan journal of economic literature classification numbers h21 c73

unequal assignment and unequal promotion in job ladders in this study gender differentials in professional status attainment are analyzed in the theoretical literature unequal treatment of females is often rationalized by their higher probability of quitting to test this hypothesis empirically we use data from the austrian microcensus and find that neither the risk of childbearing nor different productive characteristics can explain the crowding of females in lower hierarchical positions females have to fulfill higher ability standards to be promoted work experience is not rewarded in the same manner as it is for men

trends in rankings of economics departments in the u s an update economics departments in the u s are ranked based on 1 the number of pages published in thirty six economics journals 2 publications in five of the top journals 3 output per faculty member and 4 an index of the concentration of research in a department evidence shows that the top twenty departments have generally retained their positions since the 1970s but rather large changes have occurred in departments ranked from 240 to 100 an economists hall of fame is developed listing the top fifty individual producers of research in the thirty six journal set and the top five journals

on the optimal timing of capital taxes for many kinds of capital depreciation rates change systematically with the age of the capital consider an example that captures essential aspects of human capital both regarding its accumulation and its depreciation a worker obtains knowledge in period 0 then uses this knowledge in production in periods 1 and 2 and thereafter retires here depreciation accelerates it occurs at a 100 rate after period 2 and at a lower perhaps zero rate before that the present paper analyzes the implications of non constant depreciation rates for the optimal timing of taxes on capital income the main finding is that under natural assumptions the path of tax rates over time must be oscillatory oscillatory tax rates are optimal when depreciation rates accelerate with the age of the capital as in the above example and provided that the government can commit to the path of future tax rates but cannot apply different tax rates in a given year to different vintages of capital

optimal fiscal policy in a business cycle model this paper develops the quantitative implications of optimal fiscal policy in a business cycle model in a stationary equilibrium the ex ante tax rate on capital income is approximately zero there is an equivalence class of ex post capital income tax rates and bond policies that support a given allocation within this class the optimal ex post capital tax rates can range from close to independently and identically distributed to close to a random walk the tax rate on labor income fluctuates very little and inherits the persistence properties of the exogenous shocks thus there is no presumption that optimal labor tax rates follow a random walk most of the welfare gains realized by switching from a tax system like that of the united states to the ramsey system come from an initial period of high taxation on capital income

optimal taxation in life cycle economies abstract we use a very standard life cycle growth model in which individuals have a labor leisure choice in each period of their lives to prove that an optimizing government will almost always find it optimal to tax or subsidize interest income the intuition for our result is straightforward in a life cycle model the individual s optimal consumption work plan is almost never constant and an optimizing government almost always taxes consumption goods and labor earnings at different rates over an individual s lifetime one way to achieve this goal is to use capital and labor income taxes that vary with age if tax rates cannot be conditioned on age a nonzero tax on capital income is also optimal as it can imperfectly mimic age conditioned consumption and labor income tax rates journal of economic literature classification numbers e62 h21

time consistent public expenditures in this paper we study the optimal choice of public expenditures when there is no way of committing to future policy and reputational mechanisms are not operative this amounts to conflning our attention to markov equilibria the environment is a neoclassical growth model where consumers derive utility from a public good this environment gives rise to a dynamic game between successive governments and the private sector and this game is made interesting by the presence of a state variable the capital stock we characterize equilibria in terms of an intertemporal flrst order condition a generalized euler equation gee for the government and we use this condition both to gain insight into the nature of the equilibrium and as a basis for computation the gee reveals how the government optimally trades ofi tax wedges over time it also allows us to discuss in what sense a current government may be strategically in uencing future governments in their taxation decisions for a calibrated economy we flnd that when the tax base available to the government is capital income an inelastic source of funds at any moment in time the government still refrains from taxing at high rates in order to smooth distortions over time as a result the economy is far from the mix of public and private goods that would be optimal in a static context in return the savings distortion is not very severe and the capital stock is quite high

future rent seeking and current public savings abstract the conventional wisdom is that politicians rent seeking motives increase public debt and deficits this is because myopic politicians face political risk and prefer to extract political rents as early as possible in this paper we study the determination of government debt and deficits in a dynamic political economy model we show that this conventional wisdom relies on economic volatility being low relative to political uncertainty if economic volatility is high relative to political uncertainty then a rent seeking government actually over saves and over taxes along the equilibrium path relative to a benevolent government this result emerges because of the option value of rent seeking a rent seeking government over values future funds because of the possibility of using them for future rents instead of cutting taxes in the event of a future boom when marginal utility of private consumption is low this over saving bias is temporary since in the long run the rent seeking government over borrows relative to the benevolent government as it eventually squanders the funds it has accumulated we find that both the under saving and over saving bias of the government can be solved by a rule of capping deficits

redistributive taxation in a simple perfect foresight model abstract we investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation first even unanticipated redistributive capital taxation is severely limited in its effectiveness since it depresses wages second under any convergent redistributive tax policy which maximizes a paretian social objective the capital income tax will converge to zero independent of the factor supply elasticities these results are independent of workers holdings of capital

sustainable plans and mutual default this paper presents a simple general equilibrium model of optimal taxation in which both private agents and the government can default on their debt as a benchmark we consider ramsey equilibria in which the government can precommit to its policies at the beginning of time but in which private agents can default we then consider sustainable equilibria in which both government and private agent decision rules are required to be sequentially rational we adapt abreu s 1988 optimal trigger strategies to completely characterize the entire set of sustainable equilibria in particular we show that when there is sufficiently little discounting and government consumption fluctuates enough the ramsey allocations and policies in which the government never defaults can be supported by a sustainable equilibrium by way of an example we show that the larger the variance of government consumption the easier it is to support good outcomes we also show for moderate discount factors that in the best sustainable equilibrium tax rates are more volatile and debt is smaller than in the ramsey equilibrium

constitutional rules and fiscal policy outcomes we investigate the effect of electoral rules and forms of government on fiscal policy outcomes in a large sample of democracies we rely on different estimation methods to address prospective problems of statistical inference due to non random selection of these constitutional rules the findings are consistent with our theoretical priors presidential regimes induce smaller governments than parliamentary democracies while majoritarian elections lead to smaller governments and smaller welfare programs than proportional elections

reducing government debt in the presence of inequality abstract what are the welfare effects of government debt in particular what are the welfare consequences of government debt reductions we answer these questions with the help of an incomplete markets economy with production households are subject to uninsurable income shocks we make several contributions first by targeting the skewed wealth and earnings distribution of the us economy in our calibration we identify inequality as the major driver of the welfare effects of public debt gdp changes second we show that in order to fully gauge the welfare consequences and the political feasibility of government debt changes it is crucial to consider the transitional dynamics between stationary equilibria our results therefore have important implications for the design of debt reduction policies since the skewed wealth distribution generates a large fraction of borrowing constrained households a public debt reduction should be non linear such that the tax burden is postponed into the future

on the optimal tax base for commodity taxation taxed considerable effort has been devoted to characterizing the manner in which the optimal tax rates differ across the taxable commodities but the literature has rarely addressed the issue of which commodities should be included in the tax base in fact the standard optimal tax model cannot provide a useful answer to this question because it does not contain any of the resource costs normally associated with the collection of taxes an omission that seriously diminishes the policy relevance of the model 2

politicians taxes and debt the standard analysis of the efficient management of income taxes and debt assumes a benevolent government and ignores potential distortions arising from rent seeking politicians this paper departs from this framework by assuming that a rent seeking politician chooses policies if the politician chooses extractive policies citizens throw him out of power we analyse the efficient sustainable equilibrium unlike in the standard economy temporary economic shocks generate volatile and persistent changes in taxes along the equilibrium path this serves to optimally limit rent seeking by the politician and to optimally generate support for the politician from the citizens taxes resembling those of the benevolent government are very costly since the government over saves and resources are wasted on rents political distortions thus cause the complete debt market to behave as if it were incomplete however in contrast to an incomplete market economy in the long run taxes do not converge to zero and under some conditions they resemble taxes under a benevolent government

fiscal restraints and voter welfare this paper explores the logic of fiscal restraints in a political agency model with both moral hazard and adverse selection the role of the political process is both to discipline incumbents who may act against the public interest and to sort in those politicians who are most likely act in voters interests we use the model to examine the optimality of inefficient taxation limits on the size of government increasing transparency and yardstick competition some conclusions are surprising for example we show that some forms of fiscal restraint can only be desirable when incumbents are sufficiently likely to be benevolent

deadweight costs and the size of government abstract we provide a model for analyzing effects of the tax system and spending programs on the determination of government spending and taxpayer welfare an improvement in the efficiency of either taxes or spending would reduce political pressure for suppressing the growth of government and thereby increase total tax revenue and spending we demonstrate the similarity of the political responses to revenue shocks spending shocks changes in tax efficiency and changes in spending program efficiency empirical analysis of oil shocks intergovernmental grants and other autonomous changes in taxes or spending indicates that cause and effect is not only from spending to tax structures

incumbent performance and electoral control in the pure theory of electoral competition citizens compare the platforms of the candidates and vote for the one whose platform is preferred candidate strategies are identified with promises about future performance in office models of this sort have been developed in both static mckelvey 1975 and dynamic kramer 1977 i settings and all appear to have the property that if the set of alternatives is large enough in some sense equilibrium platforms rarely exist but these models have another feature that is quite as disturbing as their instability in the static setting discussed by mckelvey little attention is paid to the possibility that once in office the politician s preferences may diverge from those of his constituents and that he may therefore choose policies at variance from his platform instead it is simply assumed that promises will be kept whether or not such behavior is congruent with the interest of the officeholder it is sometimes argued that an enforcement mechanism may exist to discipline politicians for failing to keep promises but without a specification of the mechanism it is not obvious that it would be in the interests of the

international coordination of fiscal policy in limiting economies we examine the limiting behavior of cooperative and noncooperative fiscal policies as countries market power goes to zero we show that these policies converge if countries raise revenues through lump sum taxation however if there are unremovable domestic distortions such as distorting taxes there can be gains to coordination even when a single country s policy cannot affect world prices these results differ from the received wisdom in the optimal tariff literature the key distinction is that contrary to the tariff literature the spending decisions of governments are explicitly modeled

growth in the shadow of expropriation we propose a tractable variant of the open economy neoclassical growth model that emphasizes political economy and contracting frictions the political economy frictions involve a preference for immediate spending while the contracting friction is a lack of commitment regarding foreign debt and expropriation we show that the political economy frictions slow an economy s convergence to the steady state due to the endogenous evolution of capital taxation the model rationalizes why openness has different implications for growth depending on the political environment why institutions such as the treatment of capital income evolve over time why governments in countries that grow rapidly accumulate net foreign assets rather than liabilities and why foreign aid may not affect growth

a dynamic theory of public spending taxation and debt this paper presents a dynamic political economy theory of public spending taxation and debt policy choices are made by a legislature consisting of representatives elected by geographically defined districts the legislature can raise revenues via a distortionary income tax and by borrowing these revenues can be used tofinance a national public good and district specific transfers interpreted as pork barrel spending the value of the public good is stochastic reflecting shocks such as wars or natural disasters in equilibrium policy making cycles between two distinct regimes business as usual in which legislators bargain over the allocation of pork and responsible policy making in which policies maximize the collective good transitions between the two regimes are brought about by shocks in the value of the public good in the long run equilibrium tax rates are too high and too volatile public good provision is too low and debt levels are too high in some environments a balanced budget requirement can improve citizen welfare

on the optimal taxation of capital income abstract we show that in models in which labor services are supplied jointly with human capital the chamley and judd result on zero capital income taxation in the limit extends to labor taxes as long as accumulation technologies are constant returns to scale moreover for a class of widely used preferences consumption taxes are zero in the limit as well however we show by the construction of two examples that these results no longer hold for certains types of restrictions on tax rates or if there are profits generated journal of economic literatureclassification numbers e62 h21

fiscal policy in debt constrained economies abstract we study optimal fiscal policy in a small open economy soe with sovereign and private default risk and limited commitment to tax plans the soe s government uses linear taxation to fund exogenous expenditures and uses public debt to inter temporally allocate tax distortions we characterize a class of environments in which the tax on labor goes to zero in the long run while the tax on capital income may be non zero reversing the standard prediction of the ramsey tax literature the zero labor tax is an optimal long run outcome if the economy is subject to sovereign debt constraints and the domestic households are impatient relative to the international interest rate the front loading of tax distortions allows the economy to build a large aggregate debt position in the presence of limited commitment we show that a similar result holds in a closed economy with imperfect inter generational altruism providing a link with the closed economy literature that has explored disagreement between the government and its citizens regarding inter temporal tradeoffs

be careful what you calibrate for social discounting in general equilibrium abstract concerns about intergenerational equity have led to an influential practice of setting social utility discount rates based on ethical considerations rather than to match household behavior particularly in climate change economics e g stern 2006 this paper formalizes the broader policy implications of this approach in general equilibrium by characterizing jointly optimal environmental and fiscal policies in a climate economy model with differential planner household discounting first i show that decentralizing the optimal allocation requires not only high carbon prices but also fundamental changes to tax policy if the government discounts the future less than households implementing the optimal allocation requires an effective capital income subsidy a negative intertemporal wedge and in a setting with distortionary taxation an effective labor consumption tax wedge that is decreasing over time second if the government cannot subsidize capital income the constrained optimal carbon tax may be up to 50 below the present value of marginal damages the social cost of carbon due to the general equilibrium effects of climate policy on household savings third given the choice to optimize either carbon capital or labor income taxes the socially discounting planner s welfare ranking is ambiguous over a standard range of parameters overall in general equilibrium a policy maker s choice to adopt differential social discounting may thus overturn conventional recommendations for both environmental and fiscal policy

the optimal taxation of savings and investment in an open economy abstract while the taxation of savings and of investment are equivalent in a closed economy there is a real choice between the two in an open economy setting a tax authority can specifically tax the return to domestic capital following the source principle or it can tax the return to domestic savings following the residence principle this paper examines the optimal joint taxation of savings and investment for a country that has access to the international capital market conditions under which such a country should tax only savings or investment are identified generally however countries optimally tax both savings and investment most countries tax systems indeed are a mixture of the source and residence systems of taxation

optimal indirect and capital taxation we consider an environment in which agents skills are private information and follow arbitrary stochastic processes we prove that it is typically pareto optimal for an individual s marginal benefit of investing in capital to exceed his marginal cost of doing so this wedge is consistent with a positive tax on capital income we also prove that it is pareto optimal for the marginal rate of substitution between any two consumption goods to equal the marginal rate of transformation this lack of a wedge is consistent with uniform taxation of consumption goods within a period

politically credible social insurance abstract this paper considers the political credibility of allocations in settings with dynamic private information it embeds a benchmark dynamic moral environment into political economy games which feature repeated voting over mechanisms optimal politically credible allocations are shown to solve virtual planning problems with social discount factors in excess of the private one

optimal dynamic carbon taxes in a climate economy model with distortionary fiscal policy how should carbon be taxed as a part of fiscal policy the literature on optimal carbon pricing often abstracts from other taxes however when governments raise revenues with distortionary taxes carbon levies have fiscal impacts while they raise revenues directly they may shrink the bases of other taxes e g by decreasing employment this article theoretically characterizes and then quantifies optimal carbon taxes in a dynamic general equilibrium climate economy model with distortionary fiscal policy first this article establishes a novel theoretical relationship between the optimal taxation of carbon and of capital income this link arises because carbon emissions destroy natural capital they accumulate in the atmosphere and decrease future output consequently this article shows how the standard logic against capital income taxes extends to distortions on environmental capital investments second this article characterizes optimal climate policy in sub optimal fiscal settings where income taxes are constrained to remain at their observed levels third this article presents a detailed calibration that builds on the seminal dice approach but adds features essential for a setting with distortionary taxes such as a differentiation between climate change production impacts e g on agriculture and direct utility impacts e g on biodiversity existence value the central quantitative finding is that optimal carbon tax schedules are 8 24 lower when there are distortionary taxes compared to the setting with lump sum taxes considered in the literature

sources of inefficiency in a representative democracy a dynamic analysis this paper studies the efficiency of policy choice in representative democracies it extends the citizen candidate model of democratic policy making to a dynamic environment equilibrium policy choices are shown to be efficient in the sense that in each period conditional on future policies being selected through the democratic process there exists no alternative current policy choices which can raise the expected utilities of all citizens however policies that would be declared efficient by standard economic criteria are not necessarily adopted in political equilibrium the paper argues that these divergencies are legitimately viewed as politicalfailures

the political economy of dynamic elections accountability commitment and responsiveness we survey the literature on dynamic elections in the traditional settings of spatial preferences and rent seeking under perfect and imperfect monitoring of politicians we define stationary electoral equilibrium which encompasses notions used by barro 1973 ferejohn 1986 banks and sundaram 1998 and others we show that repeated elections mitigate the commitment problems of politicians and voters and that a responsive democracy result holds under general conditions term limits however attenuate the responsiveness finding we also touch on related applied work and we point to areas for fruitful future research including the connection between dynamic models of politics and economics

a theory of political and economic cycles abstract we develop a theoretical framework in which political and economic cycles are jointly determined these cycles are driven by three political economy frictions policymakers are non benevolent they cannot commit to policies and they have private information about the tightness of the government budget and rents our first main result is that in the most favorable equilibrium to the households distortions to production emerge and never disappear even in the long run this result is driven by the interaction of limited commitment and private information on the side of the policymaker since in the absence of either friction there are no long run distortions to production our second result is that if the variance of private information is sufficiently large there is equilibrium turnover in the long run so that political cycles never disappear finally our model produces a long run distribution of taxes distortions and turnover where these all respond persistently to temporary economic shocks

the dynamics of government abstract we model income redistribution with dynamic distortions as determined by rational voting without commitment among individuals of different types and income realizations we find that redistribution is too persistent relative to that chosen by a planner with commitment the difference is larger the lower is the political influence of young agents the lower is the altruistic concern for future generations and the lower is risk aversion furthermore there tends to be too much redistribution in the political equilibrium finally smooth preference aggregation as under probabilistic voting produces less persistence and does not admit multiple equilibria which occur under majority voting aggregation

cracks in the glass ceiling gender and promotion in the economics profession gender differences in promotion within the economics profession have long been a concern of the committee on the status of women in the economics profession cswep in a descriptive analysis of the aea universal academic questionnaire rebecca blank 1996 finds that hires and promotions to the associateand fullprofessor levels have averaged 4 2 and 2 7 percentage points below the share of female assistants and associates professors respectively thus women appear to be underrepresented in senior positions suggesting they may face a glass ceiling this paper uses unique panel data for american economic association aea members to examine formally whether there are differences across gender in promotion probabilities an academic labor market beyond its direct interest to economists is well suited to study possible gender differences in promotion because departments can be ranked within the profession and because professors can be ranked within a department by a welldefined promotion hierarchy a focus on academic economists offers an additional advantage in that on the job productivity can be measured directly by research output other promotion studies have had limited controls for productivity and have used cross sectional data which do not permit controls for unobserved ability e g rudolf winter ebmer and josef zweimuller 1997 failure to account for gender differences in unobserved productivity could produce biased inference prior promotion studies also have generally relied on job advancement indexes that limit the distinction between initial job assignment i e an

sequential equilibria in a ramsey tax model this paper presents a full characterization of the equilibrium value set of a ramsey tax model more generally it develops a dynamic programming method for a class of policy games between the government and a continuum of households by selectively incorporating euler conditions into a strategic dynamic programming framework we wed two technologies that are usually considered competing alternatives resulting in a substantial simplification of the problem

optimal taxation of capital income in general equilibrium with infinite lives this paper analyzes the optimal tax on capital income in general equilibrium models of the second best agents have infinite lives and utility functions which are extensions from the koopmans form the population is heterogeneous the important property of the models is the equality between the social and the private discount rates in the long run i find that the optimal tax rate is zero in the long run for a special case of additively separable utility functions i then determine the tax rates along the dynamic path and conditions that are sufficient for the local stability of the steady state

optimal taxation in a limited commitment economy this paper studies optimal ramsey taxation when risk sharing in private insurance markets is imperfect due to limited enforcement in a limited commitment economy there are externalities associated with capital and labor because individuals do not take into account that their labor and saving decisions aect aggregate supply wages

political economy of mechanisms we study the optimal mirrlees taxation problem in a dynamic economy in contrast to the standard approach where the taxation mechanism is operated by a benevolent planner with full commitment power we focus on economies in which policy decisions are made by self interested politicians who cannot commit to policies the society controls politicians using elections we show that the provision of incentives to politicians can be partly separated from redistribution across agents and that political economy constraints can be modeled as introducing additional aggregate distortions in the dynamic mirrlees problem we provide conditions under which the political economy distortions persist or disappear in the long run if the politicians are as patient as the agents the best sustainable mechanism leads to an asymptotic allocation where the aggregate distortions arising from political economy disappear in contrast when politicians are less patient than the citizens positive aggregate labor and capital taxes remain even asymptotically we conclude by providing a brief comparison of centralized

political economy of ramsey taxation 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

optimal fiscal policy in a stochastic growth model although most neoclassical growth models focus on competitive equilibria which are pareto optimal and ignore the role of government recent works by romer 28 29 judd 20 baxter and king s and bizer and judd 7 have shown that government can be introduced into and suboptimal equilibria can be studied in these models as well their studies however are positive analyses of the effects of fiscal policy in competitive equilibria the purpose of this paper is to apply ramsey s 27 theory of optimal taxation to the normative study of fiscal policy in a stocastic growth model ramsey studied a static representative consumer economy with many goods in his formulation a government consumes a fixed amount of these goods which it purchases at market prices and finances by levying flat rate excise taxes prices and quantities are determined in a competitive equilibrium the government is benevolent and its objective is to choose the optimal tax rates to maximize the representative consumer s utility a number of economists among them kydland and prescott 23 barro 3 turnovsky and brock 31 and lucas and stockey 26 have noted that ramsey s formulation can be applied to dynamic economies with uncertainty if one reinterprets the goods in static problems as dated state contingent goods in this framework a fiscal policy is a rule which specifies state contingent tax rates and the amount of public debt issue in each date the optimal fiscal policy is defined as the one which leads to a quantity