Economies with private information provide a rationale for capital taxation. In this paper we ask what the welfare gains from following this prescription are. We develop a method to answer this question in standard general equilibrium models with idiosyncratic uncertainty and incomplete markets....

This paper is a normative investigation of the properties of optimal capital taxation in the neoclassical growth model with aggregate shocks and incomplete markets. The model features a representative-agent economy with linear taxes on labor and capital. I first allow the government to trade...

We explore steady-state inequality in an intergenerational model with altruistically linked individuals who experience privately observed taste shocks. When the welfare function depends only on the initial generation, efficiency requires immiseration: inequality grows without bound and...