intertemporal utility. The income tax rate chosen by the dictator, τt , is the solution to
its maximization program:
max U = V --g—---,
σ > 0,
(12)
gt t=0 (1 - σ)(1 + ρ)t
subject to,
gt = qtτt Aktα
ln[(1 - τt+1)] + ln[(1 - qt+1)τt+1Aktα+1 + l] - ln l > 0. (13)
kt+1 = i + β(1 - τt)(1 - α)Akα (14)
0 6 qt 6 1 (15)
Equation (12) is the dictator’s budget constraint. Equation (13) represents the no-
insurrection constraint and equation (14) is an implementation (binding) constraint, de-
scribing how households react to the dictator’s choice of tax rate. Equation (15) indicates
the feasible values for q .
Thus, the behavior of the dictator depends on two exogenous preference parameters (σ
and ρ) and three endogenous variables (τ, q and k).
be the case. This would diminish the effect of the implementation constraint and hence would increase
his predatory appetite, if he were certain to rely on these foreign funds and their returns later on.
17
More intriguing information
1. ASSESSMENT OF MARKET RISK IN HOG PRODUCTION USING VALUE-AT-RISK AND EXTREME VALUE THEORY2. Staying on the Dole
3. Palkkaneuvottelut ja työmarkkinat Pohjoismaissa ja Euroopassa
4. The Modified- Classroom ObservationScheduletoMeasureIntenticnaCommunication( M-COSMIC): EvaluationofReliabilityandValidity
5. The name is absent
6. Regional dynamics in mountain areas and the need for integrated policies
7. Rural-Urban Economic Disparities among China’s Elderly
8. The name is absent
9. THE ANDEAN PRICE BAND SYSTEM: EFFECTS ON PRICES, PROTECTION AND PRODUCER WELFARE
10. How Offshoring Can Affect the Industries’ Skill Composition