University:
Boston University
Course:
CAS EC 203 | Empirical Economics 1
Academic year:

2022
Views:

294

Pages:

4
Author:

Jordyn Crane

household production : =3 tax revenue : =3 1 0.12 0.8 0.1 0.08 0.6 0.06 0.4 0.04 0.2 0 1/(1+ ) 0.02 0 0.5 tax rate  1 0 0 0.5 tax rate  1 Figure 1: Household production and the Laffer curve with full credibility Policy function *1: tr=0.98, op=0.98, =2 Policy function *1: tr=0.98, op=0.32, =2 0.6 0.6 0.5 0.5 0.4 0.4 0.3 0.3 *UC: unconstrained optimal rate 0.2 0.2 0.1 0 *UC: unconstrained optimal rate 0.1 0 0.2 0.4 0.6 0.8 long-term credibility 1 1 0 0 0.2 0.4 0.6 0.8 long-term credibility 1 Figure 2: Policy functions in t=1 with γ=2 1 tr= 0.85 op= 0.85 = 3 1= 0.1 optimal tax announcement  0.6 *UC 0.4 0.2 2 4 6 8 10 12 14 16 18 20 16 18 20 14 16 18 20 14 16 18 20 long-term credibility and probability of confiscation 1  0.5  0 2 4 6 8 10 12 14 household production  0.5 0 2 4 6 8 10 12 tax revenues  0.1 0.05 0 2 4 6 8 10 12 time Figure 3: Time series in the case of equally patient government types tr= 0.6 op= 0.6 = 3 1= 0.1 tr= 0.6 op= 0.6 = 3 1= 0.9 optimal tax announcement  optimal tax announcement  0.6 *UC 0.4 0.2 2 4 6 8 10 12 14 16 *UC 0.3 18 20 0.2 2 long-term credibility and probability of confiscation 6 8 10 12 14 16 18 20 14 16 18 20 0 2 4 6 8 10 12 14 16 18 20 14 16 18 20 14 16 18 20 household production  0.5 0 2 4 6 8 10 12 14 16 18 20 2 4 6 0.1 0.1 0.05 0.05 2 4 6 8 10 12 time 8 10 12 tax revenues  tax revenues  0 12   household production  0.5 0 10 0.5 0 4 8 1   2 6 long-term credibility and probability of confiscation 1 0.5 4 14 16 18 Figure 4.1 Time series in the case of equally impatient government types Low initial reputation 20 0 2 4 6 8 10 12 time Figure 4.2 Time series in the case of equally impatient government types High initial reputation tr= 0.85 op= 0.6 = 3 1= 0.1 optimal tax announcement  0.3 0.2 0.1 *UC 0 2 4 6 8 10 12 14 16 18 20 long-term credibility and probability of confiscation 1   0.5 0 2 4 6 8 10 12 14 16 18 20 14 16 18 20 14 16 18 20 household production  0.5 0 2 4 6 8 10 12 tax revenues  0.1 0.05 0 2 4 6 8 10 12 time Figure 5: Time series in the case of a less patient opportunistic government