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We study the dynamic taxation of capital and labor in the Ramsey model under the assumption that taxes and public good provision are decided by a self-interested politician who cannot commit to policies. We show that, as long as the politician is as patient as the citizens, the Chamley–Judd result of zero long-run taxes holds. In contrast, if the politician is less patient than the citizens, the best (subgame perfect) equilibrium from the viewpoint of the citizens involves long-run capital taxation. ; National Science Foundation (U.S.)

We study cooperative optimal Ramsey equilibria in the open economy, addressing classic policy questions: Should restrictions be placed to free trade and capital mobility? Should capital income be taxed? Should goods be taxed based on origin or destination? What are desirable border adjustments? How can a Ramsey allocation be implemented with residence-based taxes on assets? We characterize optimal wedges and analyse alternative policy implementations. ; The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.

Purpose
– The purpose of this paper is to study the problem of optimal Ramsey taxation in a finite-planning-horizon, representative-agent endogenous growth model including government expenditures as a productive input in capital formation and also with hidden actions.


Design/methodology/approach
– Technically, Malliavin calculus and forward integrals are naturally introduced into the macroeconomic theory when economic agents are faced with different information structures arising from a non-Markovian environment.


Findings
– The major result shows that the well-known Judd-Chamley Theorem holds almost surely if the depreciation rate is strictly positive, otherwise Judd-Chamley Theorem only holds for a knife-edge case or on a Lebesgue measure-zero set when the physical capital is completely sustainable.


Originality/value
– The author believes that the approach developed as well as the major result established is new and relevant.

This paper examines issues related to optimal taxation similar to those addressed by Ramsey in his celebrated 1927 paper. Rather than determining taxes on commodities with given revenue to minimize the decrement of utility may be minimum in the Ramsey approach, this model determines optimal taxation to maximize utility with revenue as endogenous variable. We analyze optimal taxation in neoclassical growth theory. We introduce a public sector to the Solow-Uzawa neoclassical growth model. The economy is composed of the public, capital goods and consumer goods sectors. Public goods enter into the utility function. The public sector is financially supported by the government's revenue from taxing consumption of capital goods and consumer goods. We derive the optimal taxation rule and construct the dynamics of the national economy. The model describes nonlinear dynamic interactions among national and sectoral growth, economic structural change, wealth/capital accumulation, and optimal tax rates in perfect competitive markets with the government intervention. We carry out comparative analysis to analyze effects of changes in some parameters on the tax rates and other economic variables.

The economics literature on mercantilism tends to emphasize gold hoarding and external barriers to trade as defining characteristics. Medieval institutions, however, included a host of internal barriers to trade as well as external ones, and monopoly privileges and high offices were often for sale. In this paper, we analyze how a stable unitary government's regulatory policies may be affected by revenues and other services generated by the efforts of rent seekers. Competition for monopoly privilege can be a significant source of government revenue that augments tax revenues, especially in settings in which collecting ordinary tax revenues is problematic. A revenue-maximizing government encourages greater monopolization than is compatible with economic efficiency, but sells monopoly privileges in a manner that promotes innovation and partially accounts for the deadweight losses associated with monopolized markets. Our analysis provides a possible public finance explanation for relatively successful authoritarian states that have relatively little corruption, but many internal and external barriers to trade. [Copyright Elsevier B.V.]

This paper explores the interaction between foreign-debt bailout guarantees, financial supervision and optimal factor taxation. The context is that of a pre-"twin crises" emerging market economy and the analysis is undertaken using an original stylised two-period model based on the insights of the "third-generation" currency crisis literature. Bailout guarantees lead to moral hazard problems as banks monitor less and lend more than is socially desirable. As such, the solution of the government's Ramsey taxation problem under bailouts entails a corrective rationale for capital taxation, implying a higher tax-rate than would otherwise be the case. When complementary regulatory instruments, such as effort-adjusted capital-requirements, are available to government, this capital tax-rate decreases with an increase in supervisory effectiveness. The paper's conclusion is that bailout guarantees should only co-exist with some form of effective banking supervision to ensure that the effects of moral hazard are mitigated, which reinforces the view that emerging economies can signal their financial reputation and also contribute to reducing the risk of future crises only by implementing good governance and effective supervisory procedures in their financial systems. ; N/A