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Optimal Fiscal Policy with Endogenous Time Preference
Author(s) -
DIOIKITOPOULOS EVANGELOS V.,
KALYVITIS SARANTIS
Publication year - 2015
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12110
Subject(s) - economics , preference , time preference , human capital , fiscal policy , microeconomics , overlapping generations model , selection (genetic algorithm) , government (linguistics) , general equilibrium theory , capital (architecture) , monetary economics , linguistics , philosophy , archaeology , artificial intelligence , computer science , history , economic growth
This paper studies the role of Ramsey taxation under the assumption that the individual rate of time preference is determined by the publicly provided social level of education. We show how intertemporal complementarities of aggregate human capital can generate multiple equilibria and we examine the role of endogenous fiscal policies in equilibrium selection. Our analysis implies a lower optimal government size due to the effect of human capital on time preference.