Should fiscal policy be different in a non-competitive framework?

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: This paper studies the use of a minimum wage law to implement the optimal redistribution policy when a distorting tax-transfer scheme is also available. The authors build a static general equilibrium model with a Ramsey planner making decisions on taxes, transfers, and minimum wage levels. Workers are assumed to differ only in their productivity. The authors find that optimal redistribution may imply the use of only taxes and transfers, only a minimum wage, or the proper combination of both policies. The key factor driving their results is the reaction of the demand for low-skilled labor to the minimum wage law. Hence, an optimal minimum wage appears to be most likely when low-skilled households are scarce, the complementarity between the two types of workers is large, or the difference in productivity is small. JEL classification: H21 and E62 Terms of use: Documents in EconStor may

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“…Then, these three equations, equation (8), the resource constraint (12), and the following condition:…”

Section: Appendix Bmentioning

confidence: 99%

Optimal Minimum Wage in a Competitive Economy

Gorostiaga

Rubio-Ramı́rez

2005

SSRN Journal

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“…Following Lucas and Stokey (1983), under complete markets (22) is satis…ed with¸t =¸for all t. This, together with (21) implies that leisure and taxes are constant, say l cm = l t ; ¿ cm = ¿ t . From the budget constraint of the government at period zero we have…”

Section: Proofmentioning

confidence: 99%

“…In order to ensure consistency with Section 2 we also compute the IRF by estimating an identical VAR (a Cholesky decomposition on the de…cit ratio, GDP growth and debt ratio) using simulated data to that we estimated in Section 2 on US data. We call 21 All models are solved using the Parameterised Expectations Algorithm described in den Haan and Marcet (1990). To solve the incomplete markets models we use the approach in Aiyagari, Marcet, Sargent and Seppälä (2002).…”

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confidence: 99%

Debt and Deficit Fluctuations and the Structure of Bond Markets

Scott

Marcet

2001

SSRN Journal

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This paper tests for the market environment within which US …s-cal policy operates, that is we test for the incompleteness of the US government bond market. We document the stochastic properties of US debt and de…cits and then consider the ability of competing optimal tax models to account for this behaviour. We show that when a government pursues an optimal tax policy and issues a full set of contingent claims, the value of debt has the same or less persistence than other variables in the economy and declines in response to higher de…cit shocks. By contrast, if governments only issue one-period risk free bonds (incomplete markets), debt shows more persistence than other variables and it increases in response to expenditure shocks.

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“…A common assumption in most macroeconomic applications of dynamic optimal taxation is that a single representative good is consumed at each date. This is the case in Lucas and Stokey (1983), Judd (1985Judd ( , 1999, Chamley (1986), Zhu (1992), Jones et al (1993Jones et al ( , 1997, Chari et al (1994), Lansing (1998, 2006), Aiyagari et al (2002), and Gorostiaga (2003Gorostiaga ( , 2005. In this case, the tax rate on all consumption goods available at a particular date are implicitly equal.…”

Section: Introductionmentioning

confidence: 99%