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Income taxes and endogenous fluctuations: a generalization

Income taxes and endogenous fluctuations: a generalization Abstract This paper offers an integrated framework of one- and two-sector optimal .growth models for the dynamic analysis of the joint effects of distorting taxes and production externalities. We investigate how capital and labor income tax rates influence local dynamics near a steady state depending on the sizes of externalities. Our results clarify how tax rates on factor income affect the range of the sizes of externalities that induce indeterminacy. We find that the possibility of indeterminacy is significantly higher for given values of externalities, the labor supply elasticity and the elasticity of intertemporal substitution in consumption if capital income tax rates are increased from zero to values similar to those in many countries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Studies in Nonlinear Dynamics & Econometrics de Gruyter

Income taxes and endogenous fluctuations: a generalization

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Publisher
de Gruyter
Copyright
Copyright © 2013 by the
ISSN
1081-1826
eISSN
1558-3708
DOI
10.1515/snde-2012-0032
Publisher site
See Article on Publisher Site

Abstract

Abstract This paper offers an integrated framework of one- and two-sector optimal .growth models for the dynamic analysis of the joint effects of distorting taxes and production externalities. We investigate how capital and labor income tax rates influence local dynamics near a steady state depending on the sizes of externalities. Our results clarify how tax rates on factor income affect the range of the sizes of externalities that induce indeterminacy. We find that the possibility of indeterminacy is significantly higher for given values of externalities, the labor supply elasticity and the elasticity of intertemporal substitution in consumption if capital income tax rates are increased from zero to values similar to those in many countries.

Journal

Studies in Nonlinear Dynamics & Econometrics – de Gruyter

Published: Sep 1, 2013

References

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    Basu
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  • Tax Policy and Stability in a Model with Sector - Specific Externalities of
    Guo
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    Guo
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    Guo
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    Pencavel
  • Balanced Budget Rules Distortionary Aggregate Instability of
    Schmitt
  • Are Apparent Productive Spillover a Figment of Specification Error of Monetary
    Basu
  • Multiple Equilibria and Progressive Taxation of Labor Income
    Guo
  • Evidence on the Empirical Plausibility of Externalities and Indeterminacy in a Two Sector Model College Working Paper
    Harrison
  • Multiple Equilibria and Progressive Taxation of Labor Income
    Guo
  • Tax Policy and Stability in a Model with Sector - Specific Externalities of
    Guo
  • Productive Cyclical Volatility Working University of
    Baxter
  • Income Spending Composition Long Run
    Rivas
  • Indeterminacy Stabilizing Policy of
    Guo
  • Indeterminacy Stabilizing Policy of
    Guo
  • Female labor supply survey of labor edited by and Amsterdam Publishers
    Killingsworth
  • Labor Supply of Men Survey InHandbook of Labor edited by and Amsterdam
    Pencavel
  • Fiscal Policy Increasing Returns Endogenous Fluctuations
    Guo
  • Indeterminacy in a Model with Sector - Specific of Economic Dynamics and
    Harrison
  • Return to Scale in US Production Estimates Implications of
    Basu
  • Indeterminacy Increasing Returns of
    Benhabib
  • Indeterminacy Sector Specific of Monetary
    Benhabib
  • Indeterminacy Increasing Returns of
    Benhabib
  • Indeterminacy in a Model with Sector - Specific of Economic Dynamics and
    Harrison