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Optimal Taxation in a Life-Cycle Model

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Author Info
Yvette, et al Alvarez

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Abstract

The authors extend Deaton's atemporal optimal commodity tax model to a life-cycle environment in which the individual may choose to work in many periods. The authors are able to confirm the Corlett-Hague intuition--goods that are more complementary with leisure should be taxed at higher rates. In addition, they prove that, in the microeconomic framework underlying some popular general-equilibrium models, if real wage and interest rates are constant over the life cycle, the addition of some interest taxation to a consumption tax regime would be welfare improving and that optimal labor tax rates decline with age. Coauthors are John Burbidge, Ted Farrell, and Leigh Palmer.

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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 25 (1992)
Issue (Month): 1 (February)
Pages: 111-22
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Handle: RePEc:cje:issued:v:25:y:1992:i:1:p:111-22

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  1. Andres Erosa & Martin Gervais, 2000. "Optimal taxation in life-cycle economies," Working Paper 00-02, Federal Reserve Bank of Richmond. [Downloadable!]
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  2. Andres Erosa & Martin Gervais, 2001. "Optimal taxation in infinitely-lived agent and overlapping generations models : a review," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 23-44. [Downloadable!]
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