By deduction, one can obtain 千B0 1+B0+…+(B 1+B0+…+(B0)+(B0) (1-t,ok t is clear that future taxation doesnt affect current saving decision. So one can expect that Ramsey solution is time consistent This is a classical model. but the above result was recently emphasized by Klein, Krusell and Rios-Rull(2002/3). To conclude. time consistent taxation plan is contingent upon current state variable, capital k That is why KKR call it Markov equilibrium TC solution is also called close-loop solution. In the above simple model with proportional income tax, time consistent solution or Markov equilibrium turns out to be irrelevant to k. So it e Is equivalent to precommitment (open-loop)t solution Finally, the result is sensitive to preference assumption. If utility is not logarithm. TC solution Is not equal to precommitment solution since income effect can't be offset by 学经学院 substitution effect• By deduction, one can obtain: ( ) ( ) ( ) ( ) t t t t t t k   k             − + + + + + + + = − − + 1 1 1 1 1 1   • It is clear that future taxation doesn’t affect current saving decision. So one can expect that Ramsey solution is time consistent • This is a classical model, but the above result was recently emphasized by Klein, Krusell and Rios-Rull (2002/3). • To conclude, time consistent taxation plan is contingent upon current state variable, capital k. That is why KKR call it “Markov equilibrium” (TC solution is also called close-loop solution.). • In the above simple model with proportional income tax, time consistent solution or Markov equilibrium turns out to be irrelevant to k. So it is equivalent to precommitment (open-loop) solution. • Finally, the result is sensitive to preference assumption. If utility is not logarithm, TC solution is not equal to precommitment solution since income effect can’t be offset by substitution effect