EconStor >
ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/49512
  
Title:Optimal taxation and constrained inefficiency in an infinite-horizon economy with incomplete markets PDF Logo
Authors:Gottardi, Piero
Kajii, Atsushi
Nakajima, Tomoyuki
Issue Date:2011
Series/Report no.:CESifo working paper: Fiscal Policy, Macroeconomics and Growth 3560
Abstract:We study the dynamic Ramsey problem of finding optimal public debt and linear taxes on capital and labor income within a tractable infinite horizon model with incomplete markets. With zero public expenditure and debt, it is optimal to tax the risky labor income and subsidize capital, while a positive amount of public debt is welfare improving. A steady state optimality condition is derived which implies that the tax on capital is positive, when savings are sufficiently inelastic to returns. A calibration of our model to the US economy indicates positive optimal taxes and a small but positive optimal debt level.
Subjects:incomplete markets
Ramsey equilibrium
optimal taxation
optimal public debt
constrained inefficiency
JEL:D52
D60
D90
E20
E62
H21
O40
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

Files in This Item:
File Description SizeFormat
66800486X.pdf478.07 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/49512

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.