Roc Armenter : Research

with Stefania Albanesi.

Most Ramsey models prescribe that capital taxes should be zero in the long run (Chamley 1986, Judd 1985). We propose a new argument for Chamley-Judd result that relies on the government's ability to reallocate distortions over time. Our argument translates into the following principle: if it is possible for the government to front-load all distortions, there will be no permanent intertemporal wedge. The principle is very general and applies to a very large class of Ramsey models. In particular, it delivers predictions on distortions, not merely taxes.