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Taxation in an Overlapping Generations Model with Human Capital

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  • Akira Yakita

Abstract

We examine the impact of flat-rate taxes on intergenerational equity in an overlapping generations model of a small open economy, assuming the intergenerational externality of human capital accumulation. The externality may cause the difference between the growth rates in private human capital and in average human capital of the economy. If the externality is sufficiently small, the introduction of an interest income tax will benefit all future generations. In contrast, if it is sufficiently great, the introduction of a wage tax could harm all generations by raising financial asset holdings and thereby reducing consumption. Copyright Kluwer Academic Publishers 2001

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  • Akira Yakita, 2001. "Taxation in an Overlapping Generations Model with Human Capital," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(5), pages 775-792, November.
    • Handle: RePEc:kap:itaxpf:v:8:y:2001:i:5:p:775-792
    DOI: 10.1023/A:1012847427911
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