Chugh S, Lechthaler W, Merkl C (2018)
Publication Language: English
Publication Type: Journal article
Publication year: 2018
DOI: 10.1016/j.jedc.2018.06.005
This paper characterizes long-run and short-run optimal fiscal policy in the labor selection framework. In a calibrated non-Ramsey decentralized equilibrium, labor market volatility is inefficient. Keeping fixed the structural parameters, the Ramsey government achieves efficient labor market volatility; doing so requires labor-income tax volatility that is orders of magnitude larger than the “tax-smoothing” results based on Walrasian labor markets, but a few times smaller than the results based on search and matching markets. We analytically characterize selection-model-consistent wedges and inefficiencies in order to understand optimal tax volatility.
APA:
Chugh, S., Lechthaler, W., & Merkl, C. (2018). Optimal Fiscal Policy with Labor Selection. Journal of Economic Dynamics & Control. https://dx.doi.org/10.1016/j.jedc.2018.06.005
MLA:
Chugh, Sanjay, Wolfgang Lechthaler, and Christian Merkl. "Optimal Fiscal Policy with Labor Selection." Journal of Economic Dynamics & Control (2018).
BibTeX: Download