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UID:aeb2ec81e33651d5e8d09f72e0d4641f
CATEGORIES:Seminars
CREATED:20260430T080020
SUMMARY:Gianluca Violante - Princeton University
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:\n\nTime-Consistent Public Policy and Inequality\n\n\nAbstract:\nWe study o
 ptimal public policy without commitment in a heterogeneous-agent incomplete
 -markets economy. We develop a tractable Aiyagari-style model in which a be
 nevolent government chooses public spending and distortionary taxes in Mark
 ov-perfect equilibrium, and derive a transparent Generalized Euler Equation
  that separates tax-base, direct redistribution, and price-mediated redistr
 ibution effects. We then examine how fiscal policy responds to permane
 nt changes in wealth inequality. Using panel evidence for OECD countries, w
 e find that increases in wealth inequality are associated with lower govern
 ment consumption, higher transfers, and higher labor taxation. The model re
 produces these responses under time-consistent policy, whereas Ramsey and c
 onstrained-efficient policies do not. The results highlight how lack o
 f commitment interacts with household heterogeneity to shape the size and c
 omposition of government.\n
DTSTAMP:20261023T180021Z
DTSTART:20260921T163000Z
DTEND:20260921T180000Z
SEQUENCE:0
TRANSP:OPAQUE
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