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Euler consumption equation - economic discussion watch

    • Thread Starter

    Hello world!

    I've been reading a lot about Euler consumption equation lately and I was wondering if there was some neat real life example to help understand the concept. Article by J. A. Parker from Northwestern University considered an example in which a government is deciding tax rates over time subject to an intertemporal budget constraint.

    I was wondering whether the example could be expanded like thist - does the Euler equation that if you find the optimal path and change the tax rate a little at any period, then the raise in marginal costs (you pay more taxes) is equated by the raise in marginal profits (when the government uses taxes to improve life conditions for everybody).

    Does this make any sense to you? More likely the question should be, is there anyone interested to discuss this topic?

    Thanks a lot in advance, and sorry if I posted this in a wrong forum.


    This is a question way beyond A level Economics, more of an undergraduate degree level question.
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Updated: March 1, 2016
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