Dynamic Mirrlees Taxation under Political Economy Constraints

Political Economy of Intermediate Goods Taxation

We generalize the Diamond–Mirrlees production efficiency theorem, that there should be no taxes on sectors producing pure intermediate goods, to an environment with political economy constraints. In our economy, allocations and taxation are decided by self-interested politicians without the power to commit to future policies. The Diamond–Mirrlees production efficiency result holds even when pol...

B-0 Review of Economic Studies Appendix B: Technical Appendix for Acemoglu-golosov-tsyvinski Dynamic Mirrlees Taxation under Political Economy

Digitized by the Internet Archive in 2011 with Funding from Boston Library Consortium Iviember Libraries Dynamic Mirrlees Taxation under Political Economy Constraints Dynamic Mirrlees Taxation under Political Economy Constraints*

We study the structure of nonlinear incentive-compatible taxes, in a dynamic economy subject to political economy and commitment problems. In contrast to existing analyses of dynamic and/or nonlinear taxation problems, we relax the assumptions that taxes are set by a benevolent government and that there is commitment to policies. Instead, in our model economy taxes are set by a selfinterested p...

An Analysis the Effect of Capital Taxation on Allocation of Resources: A Dynamic Equilibrium Model Approach

Abstract T he return of capital is fundamental to the intertemporal allocation of resources by changing the consumption behavior and capital accumulation over time. Taxation on return of capital increases the marginal product of capital, meaning that capital stock is lower than when capital is not taxed, which results decreased growth and welfare in steady state. This pape...

A unified approach to the revelation of public goods preferences and to optimal income taxation

We study a large economy model in which individuals have private information about their productive abilities and their preferences for public goods. A mechanism design approach is used to characterize implementable tax and expenditure policies. A robustness requirement in the sense of Bergemann and Morris (2005) yields individual incentive compatibility constraints that are equivalent to those...