Endogenous discounting, wariness, and efficient capital taxation

A-Tier
Journal: Journal of Economic Theory
Year: 2019
Volume: 183
Issue: C
Pages: 520-545

Score contribution per author:

1.005 = (α=2.01 / 4 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

When the discount factors that infinite lived consumers use at each date are not predetermined but are instead chosen within some set, depending on what the consumption plan is, impatience might not hold. More precisely, if the utility is the infimum of discounted utilities over that set of discount factor sequences, then preferences may be just upper semi-impatient. Such lack of lower semi-impatience, which we refer to as wariness, consists in neglecting distant gains but not distant losses. Examples are the precautionary case (a concern with the worst lifetime outcome) and the habit persistence case (a concern with a fall in living standards). The implementation of efficient allocations by trading assets sequentially requires taxes that avoid excessive savings by raising the opportunity of cost of saving up to the point of matching the marginal benefit of dishoarding at distant dates. Taxes on equilibrium plans are zero in many contexts.

Technical Details

RePEc Handle
repec:eee:jetheo:v:183:y:2019:i:c:p:520-545
Journal Field
Theory
Author Count
4
Added to Database
2026-01-24