Topic
Golden Rule (fiscal policy)
About: Golden Rule (fiscal policy) is a research topic. Over the lifetime, 661 publications have been published within this topic receiving 9789 citations.
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TL;DR: In this paper, the authors show that the conventional wisdom on Ramsey tax policy and its underlying intuition and rationales do not hold in their model and may thus be misrepresented in the literature.
Abstract: This paper addresses a long-standing problem in the optimal Ramsey capital taxation literature. The tractability of our model enables us to solve the Ramsey problem analytically along the entire transitional path. We show that the conventional wisdom on Ramsey tax policy and its underlying intuition and rationales do not hold in our model and may thus be misrepresented in the literature. We uncover a critical trade off for the Ramsey planner between aggregate allocative efficiency in terms of the modified golden rule and individual allocative efficiency in terms of self-insurance. Facing the trade off, the Ramsey planner prefers issuing debt rather than taxing capital if possible. In particular, the planner always intends to supply enough bonds to relax individuals' borrowing constraints and through which to achieve the modified golden rule by crowding out capital. Capital tax is not the vital tool to achieve aggregate allocative efficiency despite possible over-accumulation of capital. Thus the optimal capital tax can be zero, positive, or even negative, depending on the Ramsey planner's ability to issue debt. The modified golden rule can fail to hold whenever the government encounters a debt limit. Finally, the desire to relax individuals' borrowing constraints by the planner may lead to unlimited debt accumulation, resulting in a dynamic path featuring no steady state.
4 citations
01 Jan 2009
TL;DR: In this article, the authors propose a theoretical method to catch politicians' fiscal attitude concerning deficits and debt based on the analysis of the political discourse, and describe the methodological steps used to obtain it.
Abstract: We propose a theoretical method to catch politicians' fiscal attitude concerning deficits and debt based on the analysis of the political discourse. We describe the methodological steps used to obtain it.
4 citations
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TL;DR: In this paper, it is argued that due to their general instability dynamic optimization models cannot be used as positive theories of economic growth, and a simple rule of thumb is provided as an alternative to the RKC model.
Abstract: It is argued that due to their general instability dynamic optimization models cannot be used as positive theories of economic growth. The argument is substantiated by (numerical) examples. A simple rule of thumb is provided as an alternative to the RKC model. This rule is shown to perform well from a normativeand to be reasonable from a positive point of view. The model is consistent with empirically estimated rates of convergence if a broad concept of capital is used.
4 citations
TL;DR: In this paper, the authors compare the one-sector neoclassical growth model with a neo-Austrian growth model, which is derived using a basic three-process model.
4 citations
TL;DR: In this paper, the issue of optimal population in the basic overlapping generations model of neoclassical growth with endogenous fertility and time cost of children in both closed and small open economies was re-examine.
Abstract: We re-examine the issue of optimal population in the basic overlapping generations model of neoclassical growth with endogenous fertility and time cost of children in both closed and small open economies. In the former case, we show that the golden rule of population growth can be achieved by a benevolent government in a market setting whose purpose is to maximize the steady-state individual lifetime welfare, using either a child subsidy or a child tax. In the latter case, the child subsidy (tax) can be used as an exclusive instrument to replicate the command optimum.
4 citations