Intertemporal Distortions in the Second Best
We consider a very general class of public finance problems that encompasses Ramsey models of optimal taxation as well as economies with limited commitment, private information, and political economy frictions. We identify a sufficient condition to rule out permanent intertemporal distortions at the optimum: If there exists an admissible allocation that converges to the first best steady state, then all intertemporal distortions are temporary in the second best. We analyze a series of applications to illustrate the significance of this result.
Year of publication: |
2007
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Authors: | Albanesi, Stefania ; Armenter, Roc |
Institutions: | Department of Economics, School of Arts and Sciences |
Saved in:
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