Nonoptimality of the Friedman Rule with Capital Income Taxation
AbstractThis paper studies the efficient taxation of money and factor income in intertemporal optimizing growth models with infinite horizons, transaction costs technologies and flexible prices.ï¿½ Second-best optimality calls for a positive inflation tax and a non-zero capital income tax when there are restrictions on taxation of production factors or profits/rents.ï¿½ Our cases of nonoptimality of the Friedman rule - which differs from those of Mulligan and Sala-i-Martin (1997) and extend substantially those of Schmitt-Grohe and Uribe (2004a) - follow from the violation of the Diamond and Mirrlees (1971) principle on production efficiency.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 43 (2011)
Issue (Month): 1 (02)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
Other versions of this item:
- Alberto Petrucci, 2008. "Nonoptimality of the Friedman Rule with Capital Income Taxation," Economics Series Working Papers 2008-W16, University of Oxford, Department of Economics.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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