In a large economy, it is extremely difficult, if not impossible, to immediately grasp the state of our surrounding environment with precision since we normally have access only to a subset of relevant information. In this paper, we introduce this information imperfection into an ordinary model...

We investigate an overlapping generations (OLG) model in which agents who live for two periods receive idiosyncratic productivity shocks when they are old. We show that, around zero tax equilibria, we can always construct a combination of a small capital tax and a lump-sum transfer that are...