Tax Reform, Consumption Habit, and Capital Accumulation
AbstractThis paper investigates the impact of tax reforms on capital accumulation and welfare in both a model without habits (benchmark model) and a model with habits. In the benchmark model, the examined tax reforms generally lead to higher welfare. In contrast, in the model with habits the same tax changes may imply lower levels of welfare (efficiency). The paper highlights the danger that policy analysis not taking account of habits may fail to predict the correct mathematical sign of the impact of tax reform on savings, growth, and welfare.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 60 (2004)
Issue (Month): 4 (December)
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Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Find related papers by JEL classification:
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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