Filtering by: "Federal Reserve Bank of Minneapolis. Research Department." Remove constraint "Federal Reserve Bank of Minneapolis. Research Department." Creator Aiyagari, S. Rao. Remove constraint Creator: Aiyagari, S. Rao.
Creator: Aiyagari, S. Rao. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 424 Keyword: Tax policy, Tax rates, Tax, Taxation, Taxes , Deficit, Federal government, and Budget management Subject: H62 - National budget, deficit, and debt - Deficit ; Surplus and H21 - Taxation, subsidies and revenue - Efficiency ; Optimal taxation
Creator: Aiyagari, S. Rao. and Peled, Dan. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 503 Abstract: It is often argued that with a positively skewed income distribution (median less than mean) a majority voting over proportional tax rates would result in higher tax rates than those that maximize average welfare, and will accordingly reduce aggregate savings. We reexamine this view in a capital accumulation model, in which distorting redistributive taxes provide insurance against idiosyncratic shocks, and income distributions evolve endogenously. We find small differences of either sign between the tax rates set by a majority voting and a utilitarian government, for reasonable parametric specifications. We show how these differences reflect a greater responsiveness of a utilitarian government to the average need for the insurance provided by the tax-redistribution scheme. These conclusions remain true despite the fact that the model simulations produce positively skewed distributions of total income across agents. Keyword: Votes, Taxes, and Income distribution Subject: E62 - Macroeconomic policy, macroeconomic aspects of public finance, and general outlook - Fiscal policy and D72 - Analysis of collective decision-making - Models of political processes : Rent-seeking, elections, legislatures, and voting behavior
Creator: Aiyagari, S. Rao. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 518 Abstract: This paper is about a useful way of taking account of frictions in asset pricing and macroeconomics. I start by noting that complete frictionless markets models have a number of empirical deficiencies. Then I suggest an alternative class of models with incomplete markets and heterogenous agents which can also accommodate a variety of other frictions. These models are quantitatively attractive and computationally feasible and have the potential to overcome many or all of the empirical deficiencies of complete frictionless markets models. The incomplete markets model can also differ significantly from the complete frictionless markets model on some important policy questions. Keyword: Friction, Frictionless market model, Asset pricing, Macroeconomics, and Incomplete markets Subject: E13 - General aggregative models - Neoclassical and G12 - General financial markets - Asset pricing ; Trading volume ; Bond interest rates