Markets as Beneficial Constraints on the Government
34 Pages Posted: 5 May 2006
There are 2 versions of this paper
Markets as Beneficial Constraints on the Government
Markets as Beneficial Constraints on the Government
Abstract
We study the role of anonymous markets in which trades cannot be monitored by the government. We adopt a Mirrlees approach to analyze economies in which agents have private information and a benevolent government controls optimal redistributive tax policy. While unrestricted access to anonymous markets reduces the set of policy instruments available to the government, it also limits the scope of inefficient redistributive policies when the government lacks commitment. Indeed, the restrictions that anonymous markets impose on the optimal fiscal policy, especially on capital taxation and the history-dependence of income taxation, can have positive welfare effects in this case.
Keywords: Markets, Optimal policy, Optimal taxation, Time consistency
JEL Classification: E61, H21, D82
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Preference Heterogeneity and Optimal Capital Income Taxation
By Mikhail Golosov, Maxim Troshkin, ...
-
Optimal Taxation of Entrepreneurial Capital with Private Information
-
Optimal Taxation of Entrepreneurial Capital with Private Information
-
Designing Optimal Disability Insurance: A Case for Asset Testing
By Mikhail Golosov and Aleh Tsyvinski
-
Optimal Taxation with Endogenous Insurance Markets
By Mikhail Golosov and Aleh Tsyvinski
-
Inequality, Social Discounting, and Estate Taxation
By Emmanuel Farhi and Iván Werning
-
Inequality, Social Discounting and Estate Taxation
By Emmanuel Farhi and Iván Werning
-
Dynamic Mechanism Design with Hidden Income and Hidden Actions: Technical Appendix
-
Dynamic Contracting with Persistent Shocks
By Yuzhe Zhang