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Optimal Fiscal Policy with Endogenous Time Preference

Research output: Contribution to journalArticle

Evangelos Dioikitopoulos, Sarantis Kalyvitis

Original languageEnglish
Pages (from-to)848–873
JournalJournal of Public Economic Theory
Volume17
Issue number6
Early online date23 Nov 2014
DOIs
Publication statusPublished - Dec 2015

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Abstract

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.

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