Intertemporal distortions in the second best
- Intertemporal distortions in the second best
- Albanesi, Stefania
- Persistent URL:
- Department of Economics Discussion Papers
- Part Number:
- November 2007
- Department of Economics, Columbia University
- Publisher Location:
- New York
- 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.
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- Suggested Citation:
- Stefania Albanesi, Roc Armenter, 2007, Intertemporal distortions in the second best, Columbia University Academic Commons, https://doi.org/10.7916/D8CV4VX1.