search query: @indexterm time consistency / total: 10
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| Author: | Dillen, M. Lundholm, M. |
| Title: | Dynamic income taxation, redistribution, and the ratchet effect |
| Journal: | Journal of Public Economics
1996 : JAN, VOL. 59:1, p. 69-94 |
| Index terms: | TIME CONSISTENCY TAXATION DISTRIBUTION |
| Language: | eng |
| Abstract: | In this paper the authors extend the classic optimum linear income tax model to a twice repeated game. A utilitarian policy-maker decides on the second-period tax system on the basis of observed first-period behavior. The authors summarize their findings as follows. First, the static optimal linear tax results cannot be expected to hold in a dynamic setting. Second, more productive households are likely to mimic the behavior of less productive households. Third, the optimal dynamic first-period tax rate might be negative. |
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