2016ReviewOpen access

Optimal Ramsey Capital Taxation with Endogenous Government Spending

YiLi Chien, Junsang Lee

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Abstract

The authors study optimal capital income taxation in heterogeneous agent economies featuring endogenous government spending. Similar to Aiyagari (1995), they find that the long-run optimal capital tax rate should not be zero as long as the competitive equilibrium risk-free interest rate differs from the subjective time discount rate.

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The authors study optimal capital income taxation in heterogeneous agent economies featuring endogenous government spending. Similar to Aiyagari (1995), they find that the long-run optimal capital tax rate should not be zero as long as the competitive equilibrium risk-free interest rate differs from the subjective time discount rate.

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Available abstract

The authors study optimal capital income taxation in heterogeneous agent economies featuring endogenous government spending. Similar to Aiyagari (1995), they find that the long-run optimal capital tax rate should not be zero as long as the competitive equilibrium risk-free interest rate differs from the subjective time discount rate.

Key concepts: Economics, Government spending, Monetary economics, Macroeconomics, Microeconomics, Market economy, Welfare

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