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A note on incomplete factor taxation

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  • Armenter, Roc

Abstract

Optimal capital taxes may be positive in the steady state in Ramsey models with an incomplete set of factor taxes. I show this possibility crucially depends on how fiscal policy is constrained at date t = 0. If the government is barred from manipulating the value of initial assets, the Chamley-Judd result reappears: the optimal capital tax is always zero in the steady state.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 92 (2008)
Issue (Month): 10-11 (October)
Pages: 2275-2281

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Handle: RePEc:eee:pubeco:v:92:y:2008:i:10-11:p:2275-2281

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Web page: http://www.elsevier.com/locate/inca/505578

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Keywords: E62 Ramsey equilibrium Incomplete Factor Taxation;

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References

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  1. Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, vol. 28(1), pages 59-83, October.
  2. Roc Armenter & Stefania Albanesi, 2007. "Intertemporal Distortions and Second Best Theory," 2007 Meeting Papers 497, Society for Economic Dynamics.
  3. Stefania Albanesi & Roc Armenter, 2007. "Intertemporal Distortions in the Second Best," Discussion Papers 0708-08, Columbia University, Department of Economics.
  4. V. V. Chari & Patrick J. Kehoe, 1998. "Optimal fiscal and monetary policy," Staff Report 251, Federal Reserve Bank of Minneapolis.
  5. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
  6. Jones, Larry E. & Manuelli, Rodolfo E. & Rossi, Peter E., 1997. "On the Optimal Taxation of Capital Income," Journal of Economic Theory, Elsevier, vol. 73(1), pages 93-117, March.
  7. Correia, Isabel H., 1996. "Should capital income be taxed in the steady state?," Journal of Public Economics, Elsevier, vol. 60(1), pages 147-151, April.
  8. Zhu, Xiaodong, 1992. "Optimal fiscal policy in a stochastic growth model," Journal of Economic Theory, Elsevier, vol. 58(2), pages 250-289, December.
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Cited by:
  1. Fabio Ghironi & Sanjay K. Chugh, 2011. "Optimal Fiscal Policy with Endogenous Product Variety," Boston College Working Papers in Economics 775, Boston College Department of Economics.
  2. Conesa, Juan C. & Domínguez, Begoña, 2013. "Intangible investment and Ramsey capital taxation," Journal of Monetary Economics, Elsevier, vol. 60(8), pages 983-995.
  3. David M. Arseneau & Sanjay K. Chugh & André Kurmann, 2009. "Asset Value Constraints in Models of Incomplete Factor Taxation," Cahiers de recherche 0949, CIRPEE.
  4. Sanjay K. Chugh & S. Boragan Aruoba, 2009. "Money and Optimal Capital Taxation," 2009 Meeting Papers 69, Society for Economic Dynamics.
  5. Stefania Albanesi & Roc Armenter, 2007. "Intertemporal Distortions in the Second Best," Discussion Papers 0708-08, Columbia University, Department of Economics.
  6. Sanjay K. Chugh & S. Boragan Aruoba, 2007. "Optimal Fiscal and Monetary Policy when Money is Essential," 2007 Meeting Papers 80, Society for Economic Dynamics.
  7. Sanjay K. Chugh & Andre Kurmann & David M. Arseneau, 2009. "Optimal Capital Taxation in an Economy with Capital Allocation Frictions," 2009 Meeting Papers 147, Society for Economic Dynamics.
  8. Till Gross, 2013. "Capital Taxation, Intermediate Goods, and Production Efficiency," Carleton Economic Papers 13-09, Carleton University, Department of Economics.

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