Political Economy of Ramsey Taxation

@inproceedings{Golosov2011PoliticalEO,
  title={Political Economy of Ramsey Taxation},
  author={Mikhail Golosov and NES Aleh Tsyvinski},
  year={2011}
}
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… CONTINUE READING

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