Abstract
Should the government run an uncertain fiscal policy to finance its liabilities? We call the resulting uncertainty taxspots, and study conditions that make taxspots optimal and recurrent in standard Ramsey problems. We show that prudence and market incompleteness play a role in sustaining taxspots, and that equal-treatment randomizations can be decentralized via taxspots even in the absence of financial markets.
Original language | English (US) |
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Article number | 105884 |
Journal | Journal of Economic Theory |
Volume | 220 |
DOIs | |
State | Published - Sep 2024 |
Keywords
- Lottery equilibrium
- Ramsey taxation
- Sunspots
ASJC Scopus subject areas
- Economics and Econometrics