In an influential paper Angeletos (2002) argues that, even in the absence of state contingent debt, governments can achieve a complete market outcome through issuing bonds of different maturities. The key insight is that fluctuations in the yield curve are exploited through holding or selling...

Financing retirement benefits is probably the most significant fiscal challenge that governments in industrial economies will be facing in the next few decades. Social security reform has therefore become an important public policy issue for many countries and various reform proposals have been...

We study optimal capital taxation under limited commitment. We prove that the optimal tax rate on capital income should be positive in steady state and should be increasing over time provided that full risk-sharing is not feasible. In a limited commitment environment, a one unit increase of...

This paper studies Pareto e.cient income taxation in an economy with infinitely-lived individuals whose income generating abilities evolve according to a two-state Markov process. The study yields two main results. First, when individuals are risk neutral, the fraction of individuals who face a...

In this paper we argue that it might not be such a bad idea to tax capital income in the long run. We address this question in an environment in which individuals are finitely lived and face uninsurable idiosyncratic labor income risk. In choosing a tax system a benevolent planner trades off...