Efficient Stationary Taxation and Intertemporal General Equilibrium
AbstractWe present a method to analyze the welfare cost of price distortions created by taxes on the incomes of capital and labor and on consumption in an intertemporal model of general equilibrium. This efficiency cost depends in an important way on the production technology. It is not very sensitive to the ratio between the tax rates on capital and labor respectively, when the elasticity of substitution between these factors is small. Our method allows us to determine under the assumptions of the model, the optimal combination of taxes on capital and labor income respectively. The consumption tax is more efficient than the labor income tax.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 591.
Length: 28 pages
Date of creation: May 1981
Date of revision:
Publication status: Published in International Economic Review (June 1985), 36(1): 452-468
Note: CFP 626.
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
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