Do taxspots matter? A study of optimal tax uncertainty

A. Citanna, Mich Palle Tvede

Research output: Contribution to journalArticlepeer-review

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 languageEnglish (US)
Article number105884
JournalJournal of Economic Theory
Volume220
DOIs
StatePublished - Sep 2024

Keywords

  • Lottery equilibrium
  • Ramsey taxation
  • Sunspots

ASJC Scopus subject areas

  • Economics and Econometrics

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