Intertemporal Distortions in the Second Best

  title={Intertemporal Distortions in the Second Best},
  author={Stefania Albanesi},
  • Stefania Albanesi
  • Published 2007
We consider a very general class of public …nance problems that encompasses Ramsey models of optimal taxation as well as economies with limited commitment, private information, and political economy frictions. We identify a su¢ cient condition to rule out permanent intertemporal distortions at the optimum: If there exists an admissible allocation that converges to the …rst best steady state, then all intertemporal distortions are temporary in the second best. We analyze a series of applications… CONTINUE READING
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