Time Inconsistency in Capital Accumulation1
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چکیده
Time consistency has become an integral part of explanations of many economic phenomena, in large part because of insights it gives into these phenomena. For example, it helps us to formalize and hence better understand a welfare-maximizing government’s incentive to promise that accumulated capital will not be taxed and then to use a capital levy in the face of severe revenue shortfalls. The government’s incentive toward time-inconsistent behavior in this case also helps explain why capital accumulation may be so low in countries with weak safeguards against such behavior.
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