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Optimal government policies in models with heterogeneous agents

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dc.contributor.author Bohácek, Radim
dc.contributor.author Kejak, Michal
dc.date.accessioned 2018-09-27T12:07:54Z
dc.date.available 2018-09-27T12:07:54Z
dc.date.issued 2018-04
dc.identifier.uri http://hdl.handle.net/10230/35524
dc.description.abstract In this paper we develop a new approach for funding optimal government policies in economies with heterogeneous agents. Using the calculus of variations, we present three classes of equilibrium conditions from government's and individual agent's optimization problems: 1) the first order conditions: the government's Lagrange-Euler equation and the individual agent's Euler equation; 2) the stationarity condition on the distribution function; and, 3) the aggregate market clearing conditions. These conditions form a system of functional equations which we solve numerically. The solution takes into account simultaneously the e_ect of the government policy on individual allocations, the resulting optimal distribution of agents in the steady state and, therefore, equilibrium prices. We illustrate the methodology on a Ramsey problem with heterogeneous agents, finding the optimal limiting tax on total income.
dc.description.sponsorship The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries ADEMU Working Paper Series;130
dc.rights This is an Open Access article distributed under the terms of the Creative Commons Attribution License Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution and reproduction in any medium provided that the original work is properlyattributed.
dc.rights.uri https://creativecommons.org/licenses/by/4.0/
dc.subject.other Optimal macroeconomic policy
dc.subject.other Optimal taxation
dc.subject.other Computational techniques
dc.subject.other Heterogeneous agents
dc.subject.other Distribution of wealth and income
dc.title Optimal government policies in models with heterogeneous agents
dc.type info:eu-repo/semantics/workingPaper
dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/649396
dc.rights.accessRights info:eu-repo/semantics/openAccess


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