Against Chamley's (1986) and Lucas's (1990) result that the optimal long-run capital income tax is zero, this paper shows that in a Bewley-type incomplete-markets economy with uninsured idiosyncratic …
PublishedClassicQuarterly Journal of EconomicsPublished Aug 1994
This paper builds the standard growth model modified so that a continuum of infinitely-lived agents face uninsured idiosyncratic labor-income risk and a borrowing constraint, and shows that the …