Tax Smoothing in Frictional Labor Markets

• 成果类型: Article
• 署名作者: Arseneau, David M.; Chugh, Sanjay K.
• 署名单位: Federal Reserve System - USA; Federal Reserve System Board of Governors; Boston College; Leibniz Association; Institut fur Weltwirtschaft an der Universitat Kiel (IFW)
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/668837
• 发表日期: 2012
• 页码: 926-985
• 关键词: monetary-policy; cyclical behavior; equilibrium unemployment; general equilibrium; optimal taxation; keynesian model; capital income; fiscal-policy; search; fluctuations

摘要

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 volatility induces dramatically smaller, but efficient, fluctuations of labor markets by keeping distortions constant over the business cycle. We relate the results to standard Ramsey theory by developing welfare-relevant concepts of efficiency and distortions based on primitive matching frictions. Although the basic Ramsey principles of wedge smoothing and zero intertemporal distortions hold, tax smoothing depends on whether wages are set efficiently.