Optimal redistributive policy in debt constrained economies

• 成果类型: Article
• 署名作者: Tran-Xuan, Monica
• 署名单位: State University of New York (SUNY) System; University at Buffalo, SUNY
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2023.103785
• 发表日期: 2023
• 关键词: Optimal taxation; redistribution; limited commitment; Sovereign debt

摘要

How should governments with a preference for redistribution design tax policies when facing limited borrowing? This paper studies optimal taxation in a small open economy with hetero-geneous agents and endogenous debt constraints arising from the government's limited com-mitment to fiscal policies. The optimal labor tax decreases over time and is nonzero in the limit, and the optimal capital and domestic borrowing taxes are positive in the limit, deviating from the standard Ramsey tax results. The government's redistributive motive directly affects optimal tax levels, whereas binding debt constraints influence optimal tax dynamics. In the nu-merical analysis, a stronger redistributive preference requires greater initial tax distortions and a higher external debt level in the long run.& COPY; 2023 Elsevier B.V. All rights reserved.