Redistributive Taxation in a Simple Life-Cycle Model.
An overlapping-generations model with "rich" and "poor" life-cycle planners is developed. Positive aspects of redistributive capital and labor taxation are then analyzed. The conditions required for Feldstein's result, that the long-run capital-labor ratio is invariant to wage taxations, are discussed. The utility frontier is shown to generally have a slope with an absolute value different from one in the neighborhood of a no-tax equilibrium. Labor income is clearly a more efficient base for long-run redistribution only if the economy is dynamically inefficient and the rich household benefits from an increase in the gross interest rate. Even in this case, the labor-income base may not be considered more desirable when transitional effects are considered. Copyright 1989 by The London School of Economics and Political Science.
Year of publication: |
1989
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Authors: | Rangazas, Peter |
Published in: |
Economica. - London School of Economics (LSE). - Vol. 56.1989, 224, p. 487-503
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Publisher: |
London School of Economics (LSE) |
Saved in:
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