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Intertemporal distortions in the second best
| Author(s): | Albanesi, Stefania
Armenter, Roc |
| Title: | Intertemporal distortions in the second best |
| Issue Date: | 2007-Nov-21 |
| Series no.: | Discussion Paper 0708-08 |
| Bookmark as: | http://hdl.handle.net/10022/AC:P:15438 |
| Abstract: | We consider a very general class of public finance problems that encompasses Ramsey models of optimal taxation as well as economies with limited commitment, private information, and political economy frictions. We identify a sufficient condition to rule out permanent intertemporal distortions at the optimum: If there exists an admissible allocation that converges to the first best steady state, then all intertemporal distortions are temporary in the second best. We analyze a series of applications to illustrate the significance of this result. |
| Collection(s): | Economics Discussion Papers
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