Ricardian Equivalence Theorem
For concreteness, suppose that all consumers in the economy earn
the same labour income and pay the same amount of taxes in each
period, but that one group of consumers ('the poor') enters the
economy with a zero level of initial wealth at the beginning of
period 1, whereas the remaining consumers ('the rich') start out
with a level of initial wealth equal to V1. Moreover,
suppose that disposable labour income in period 1 is so low...