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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/46310
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| Title: | | Time-consistent fiscal policy under heterogeneity: Conflicting or common interests?  |
| Authors: | | Angelopoulos, Konstantinos Malley, James R. Philippopoulos, Apostolis |
| Issue Date: | | 2011 |
| Series/Report no.: | | CESifo working paper: Fiscal Policy, Macroeconomics and Growth 3444 |
| Abstract: | | This paper studies the aggregate and distributional implications of Markov-perfect taxspending policy in a neoclassical growth model with capitalists and workers. Focusing on the long run, our main findings are: (i) it is optimal for a benevolent government, which cares equally about its citizens, to tax capital heavily and to subsidise labour; (ii) a Pareto improving means to reduce inefficiently high capital taxation under discretion is for the government to place greater weight on the welfare of capitalists; (iii) capitalists and workers preferences, regarding the optimal amount of 'capitalist bias', are not aligned implying a conflict of interests. |
| Subjects: | | optimal fiscal policy Markov-perfect equilibrium heterogeneous agents |
| JEL: | | E62 H21 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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