This paper revisits a well-known case of optimal fiscal policy in a Ramsey model where consumer utility is defined over consumption and public goods. We show that "normalising" the size of the population to one eliminates the scope for active policy-making since the decentralised equilibrium coincides with social planning. Then, we modify the model to allow for a population of N > 1 agents, whereby restoring the role of the government as a policy-maker. Both in the Stackelberg case and in the decentralised game, we prove that optimal fiscal policy and consumption are not only time consistent but also subgame perfect.

R. Cellini, L. Lambertini (2007). Time Consistent Fiscal Policies in a Ramsey Economy. MATHEMATICAL SOCIAL SCIENCES, 53(3), 296-313 [10.1016/j.mathsocsci.2006.12.004].

Time Consistent Fiscal Policies in a Ramsey Economy

LAMBERTINI, LUCA
2007

Abstract

This paper revisits a well-known case of optimal fiscal policy in a Ramsey model where consumer utility is defined over consumption and public goods. We show that "normalising" the size of the population to one eliminates the scope for active policy-making since the decentralised equilibrium coincides with social planning. Then, we modify the model to allow for a population of N > 1 agents, whereby restoring the role of the government as a policy-maker. Both in the Stackelberg case and in the decentralised game, we prove that optimal fiscal policy and consumption are not only time consistent but also subgame perfect.
2007
R. Cellini, L. Lambertini (2007). Time Consistent Fiscal Policies in a Ramsey Economy. MATHEMATICAL SOCIAL SCIENCES, 53(3), 296-313 [10.1016/j.mathsocsci.2006.12.004].
R. Cellini; L. Lambertini
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/50004
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