This paper examines a dynamic stochastic economy with a benevolent government that cannot commit to its future policies. I consider equilibria that are time-consistent and allow for history-dependent strategies. A new numerical algorithm is developed to solve for the set of equilibrium payoffs....

This paper analyzes the effects of time-consistent capital taxation on the level of capital and welfare. We find that a commitment to a zero capital tax shifts the time inconsistency problem towards labor taxes and the provision of public consumption. By comparing the worst time-consistent...

This paper examines a dynamic stochastic economy with a benevolent government that cannot commit to future policies. Following Phelan and Stacchetti (2001), we consider sequential sustainable equilibria (SSE). We numerically solve for the set of equilibrium payoffs, and investigate whether the...