Abstract The aim of this paper is to study the role of progressive tax rules on the steady state and the stability properties in a Ramsey economy with heterogeneous households and borrowing constraints. Since labor supply is elastic, considering different tax rates on capital and labor incomes...

In this paper, we address the stability issue, stressing the role of labor supply, in a Ramsey model with heterogeneous households subject to borrowing constraints. Making labor supply endogenous leads us to prove the existence of two kinds of steady state: the one where everybody supplies...