dc.contributor.author
Bohácek, Radim
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Kejak, Michal
dc.identifier
https://ddd.uab.cat/record/196820
dc.identifier
urn:oai:ddd.uab.cat:196820
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.abstract
The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
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application/pdf
dc.relation
European Commission 649396
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Barcelona Graduate School of Economics. ADEMU working paper series ;
dc.rights
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dc.rights
https://creativecommons.org/licenses/by/4.0/
dc.subject
Optimal macroeconomic policy
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Optimal taxation
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Computational techniques
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Heterogeneous agents
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Distribution of wealth and income
dc.title
Optimal government policies in models with heterogeneous agents
