Social discounting and incentive compatible fiscal policy

Catarina Reis

doi:10.1016/j.jet.2012.09.001

Social discounting and incentive compatible fiscal policy

Catarina Reis^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

6 Citations (Scopus)

Abstract

This paper considers a representative agent model of linear capital and labor income taxation in which the government cannot commit ex-ante to a sequence of policies for the future. In this setup, if the government is more impatient than the households, the capital income tax will be positive in steady state. Thus, impatience and lack of commitment are able to generate positive capital taxes in the long run, although each of these characteristics individually was not. Furthermore, the steady state to which the economy converges is independent of initial conditions.

Original language	English
Pages (from-to)	2469-2482
Number of pages	14
Journal	Journal of Economic Theory
Volume	147
Issue number	6
DOIs	https://doi.org/10.1016/j.jet.2012.09.001
Publication status	Published - Nov 2012

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth
SDG 17 Partnerships for the Goals

Keywords

Debt
Fiscal policy
Incidence
Optimal taxation

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10.1016/j.jet.2012.09.001

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title = "Social discounting and incentive compatible fiscal policy",

abstract = "This paper considers a representative agent model of linear capital and labor income taxation in which the government cannot commit ex-ante to a sequence of policies for the future. In this setup, if the government is more impatient than the households, the capital income tax will be positive in steady state. Thus, impatience and lack of commitment are able to generate positive capital taxes in the long run, although each of these characteristics individually was not. Furthermore, the steady state to which the economy converges is independent of initial conditions.",

keywords = "Debt, Fiscal policy, Incidence, Optimal taxation",

author = "Catarina Reis",

note = "Funding Information: I am grateful to Mike Golosov, Vasia Panousi, Pedro Teles, and Isabel Correia, as well as participants at the Econometric Society NAWM 2008, the Federal Reserve Board seminar, the Max Planck Instituteʼs Workshop on Incentives, Efficiency, and Redistribution in Public Economics, the SED 2009 meeting, the PEJ 2009 meeting, the PET 2009 meeting, and the ASSET 2009 meeting for helpful comments. Financial support from Funda{\c c}{\~a}o para a Ci{\^e}ncia e Tecnologia is gratefully acknowledged. ",

year = "2012",

month = nov,

doi = "10.1016/j.jet.2012.09.001",

language = "English",

volume = "147",

pages = "2469--2482",

journal = "Journal of Economic Theory",

issn = "0022-0531",

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T1 - Social discounting and incentive compatible fiscal policy

AU - Reis, Catarina

N1 - Funding Information: I am grateful to Mike Golosov, Vasia Panousi, Pedro Teles, and Isabel Correia, as well as participants at the Econometric Society NAWM 2008, the Federal Reserve Board seminar, the Max Planck Instituteʼs Workshop on Incentives, Efficiency, and Redistribution in Public Economics, the SED 2009 meeting, the PEJ 2009 meeting, the PET 2009 meeting, and the ASSET 2009 meeting for helpful comments. Financial support from Fundação para a Ciência e Tecnologia is gratefully acknowledged.

PY - 2012/11

Y1 - 2012/11

N2 - This paper considers a representative agent model of linear capital and labor income taxation in which the government cannot commit ex-ante to a sequence of policies for the future. In this setup, if the government is more impatient than the households, the capital income tax will be positive in steady state. Thus, impatience and lack of commitment are able to generate positive capital taxes in the long run, although each of these characteristics individually was not. Furthermore, the steady state to which the economy converges is independent of initial conditions.

AB - This paper considers a representative agent model of linear capital and labor income taxation in which the government cannot commit ex-ante to a sequence of policies for the future. In this setup, if the government is more impatient than the households, the capital income tax will be positive in steady state. Thus, impatience and lack of commitment are able to generate positive capital taxes in the long run, although each of these characteristics individually was not. Furthermore, the steady state to which the economy converges is independent of initial conditions.

KW - Debt

KW - Fiscal policy

KW - Incidence

KW - Optimal taxation

UR - https://www.scopus.com/pages/publications/84869126275

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DO - 10.1016/j.jet.2012.09.001

M3 - Article

AN - SCOPUS:84869126275

SN - 0022-0531

VL - 147

SP - 2469

EP - 2482

JO - Journal of Economic Theory

JF - Journal of Economic Theory

IS - 6

ER -

Social discounting and incentive compatible fiscal policy

Abstract

UN SDGs

Keywords

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