Time-Consistent Public Expenditures

@inproceedings{Klein2004TimeConsistentPE,
  title={Time-Consistent Public Expenditures},
  author={Paul Klein and Per Krusell and Jos{\'e}-V{\'i}ctor R{\'i}os-Rull},
  year={2004}
}
How should aggregate public expenditures be traded off against their financing costs? We incorporate public expenditures into a standard neoclassical growth setup with model policy choice as made by a government choosing tax rates and spending so that the resulting competitive equilibrium allocation maximizes consumer welfare. An additional key restriction that the government faces in our model is that it cannot commit to future policy. This restriction binds: current income taxes influence… CONTINUE READING

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