Sequential Equilibria in a Ramsey Tax Model
Christopher Phelan, Ennio Stacchetti
Econometrica · 2001 · Volume 69 · Issue 6
Abstract
This paper presents a full characterization of the equilibrium value set of a Ramsey tax model. More generally, it develops a dynamic programming method for a class of policy games between the government and a continuum of households. By selectively incorporating Euler conditions into a strategic dynamic programming framework, we wed two technologies that are usually considered competing alternatives, resulting in a substantial simplification of the problem.
Keywords
Capital taxation, government credibility, time consistent government policy, recursive methods
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