Arseneau, David M.; Chugh, Sanjay K. - In: Journal of Political Economy 120 (2012) 5, pp. 926-926
The optimality of tax smoothing is reexamined using frictional labor markets. In a calibrated matching model that generates empirically relevant labor market fluctuations conditional on exogenous fiscal policy, the Ramsey-optimal policy calls for extreme labor tax rate volatility. Purposeful tax...