Capital Taxation and Ownership When Markets Are Incomplete
This paper is a normative investigation of the properties of optimal capital taxation in the neoclassical growth model with aggregate shocks and incomplete markets. The model features a representative-agent economy with linear taxes on labor and capital. I first allow the government to trade only a real risk-free bond. Optimal policy has the following features: labor taxes fluctuate very little, capital taxes are volatile and feature a positive (negative) spike after a negative (positive) shock to the government budget, and capital taxes average to roughly zero across periods. I then consider the implications of allowing the government to trade capital.
Year of publication: |
2010
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Authors: | Farhi, Emmanuel |
Published in: |
Journal of Political Economy. - University of Chicago Press. - Vol. 118.2010, 5, p. 908-908
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Publisher: |
University of Chicago Press |
Saved in:
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