Assuming a neoclassical production technology, this paper characterizes constrained efficient intertemporal wedges for the macro aggregate as well as the micro individual allocation of dynamic Mirrleesian economies. We first construct “Pareto-Negishi weights” from the multipliers on a...

What is the prescription of Ramsey capital taxation in the long run? Aiyagari (1995) addressed the question in a heterogeneous-agent incomplete-markets (HAIM) economy, showing that a positive capital tax should be imposed to implement the so-called modified golden rule (MGR). This paper revisits...

This paper quantitatively characterizes optimal linear and two-bracket income taxes. We consider a dynamic-stochastic-general-equilibrium model in which tax design involves redistributing income for both equity and social insurance. Substantive findings include: (i) a significant fraction of...

In a closed economy, the infinite-horizon and the overlapping generations (OG) model prescribe diametrically opposite policies on factor taxation: the former argues that the growth-maximizing capital income tax rate should be set to zero, whereas the latter argues that it should be set as high...