Optimal taxation with endogenously incomplete debt markets

• 成果类型: Article
• 署名作者: Sleet, C; Yeltekin, E
• 署名单位: Northwestern University; University of Iowa
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2004.07.009
• 发表日期: 2006
• 页码: 36-73
• 关键词: Optimal taxation; fiscal policy; dynamic contract theory

摘要

Empirical analyses of labor tax and public debt processes provide prima facie evidence for imperfect government insurance. This paper considers a model in which the government's inability to commit to future policies or to report truthfully its spending needs renders government debt markets endogenously incomplete. A method for solving for optimal fiscal policy under these constraints is developed. Such policy is found to be intermediate between that implied by the complete insurance (Ramsey) model and a model with exogenously incomplete debt markets. In contrast to optimal Ramsey policy, optimal policy in this model is consistent with a variety of stylized fiscal policy facts such as the high persistence of labor tax rates and debt levels and the positive covariance between government spending and the value of government debt sales. (c) 2004 Elsevier Inc. All rights reserved.