Abstract
In Chapter 3, we investigate normative aspects of tax policy in an overlapping generations growth model. The set of commodity taxes that minimizes the deadweight loss is called Ramsey taxes. The Ramsey rule has a simple form (see Chapter 1). Under certain simplifying conditions, Ramsey taxes are proportional to the sum of the reciprocal of the elasticity of demand and supply. The tax rate should be set so that the increase in deadweight loss per extra dollar raised is the same for each commodity. The Ramsey rule is a useful criterion for static efficiency. In Chapter 2, on the other hand, we have shown that the golden rule is a useful criterion for dynamic efficiency. Thus, this chapter investigates the relationship between the Ramsey rule and the golden rule when lump-sum taxes are not available in the overlapping generations growing economy.KeywordsCapital IncomeLabor IncomeGolden RuleGovernment Budget ConstraintRamsey RuleThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
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