NotesECN741-page16

# NotesECN741-page16 - -τ k ) r ] k i + R b b i ´ (24)...

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ECN 741: Public Economics Fall 2008 Note that any feasible allocation that satisﬁes ( 18 ) can be implemented by two of the four taxes (that is we only need two of the τ c , τ l , τ x and τ k to implement the same allocations). This in turn implies that τ kt = 0 1 + τ ct 1 + τ xt = constant 2.2.1 Heterogeneous consumers Suppose there are two type of consumers i = 1 , 2 with preferences X t =0 β t U i ( c it ,l it ) The resources constraint for the economy is c 1 t + c 2 t + k t +1 = F ( k t ,l 1 t ,l 2 t ) + (1 - δ ) k t (23) implementability constraint for consumer i is X t =0 β t ± U i ct c it + U i lt l it ² = U i 0 ³ [(1 + τ x 0 )(1 - δ ) + (1
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Unformatted text preview: -τ k ) r ] k i + R b b i ´ (24) Suppose government puts welfare weights ω i on consumers of type i . The Ramsey problem is max ω 1 ∞ X t =0 β t U 1 ( c 1 t ,l 1 t ) + ω 2 ∞ X t =0 β t U 2 ( c 2 t ,l 2 t ) subject to ( 23 ) and ( 24 ). Attached multiplier λ i to implementability constraint of type i and write W ( c 1 ,c 2 ,l 1 ,l 2 ,λ 1 ,λ 2 ) = X i =1 , 2 ± ω i U i ( c i ,l i ) + λ i ( U i c c i + U i l l i )² 16...
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## This note was uploaded on 12/10/2011 for the course MAT 121 taught by Professor Wong during the Fall '10 term at SUNY Stony Brook.

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