Optimal Ramsey taxation with endogenous risk aversion
Economics Letters, cilt.171, ss.87-92, 2018 (SSCI, Scopus)
- Yayın Türü: Makale / Tam Makale
- Cilt numarası: 171
- Basım Tarihi: 2018
- Doi Numarası: 10.1016/j.econlet.2018.07.005
- Dergi Adı: Economics Letters
- Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
- Sayfa Sayıları: ss.87-92
- Anahtar Kelimeler: Optimal tax policy, Real business cycle model, Time-varying risk preferences
- Boğaziçi Üniversitesi Adresli: Evet
Özet
In this paper, we study optimal Ramsey taxation under endogenous risk aversion formulation in an otherwise standard real business cycle economy. We show that when the risk aversion coefficient co-moves counter-cyclically, the canonical Chamley–Judd (Chamley, 1986; Judd, 1985) result does not hold true, and the Ramsey planner chooses a positive capital income tax rate in the long run. We report that result is due to additional wedges both in the intratemporal and the intertemporal optimality condition of the representative household.