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Optimal taxation of capital income in a growth model with monopoly profits

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  • Jang-Ting Guo
  • Kevin J. Lansing

Abstract

An extension of the standard neoclassical growth model, demonstrating that the optimal steady-state tax on capital income can be positive, negative, or zero, depending on the level of monopoly profits and the degree to which profits can be taxed.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 9510.

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Date of creation: 1995
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Handle: RePEc:fip:fedcwp:9510

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Keywords: Taxation ; Dividends;

References

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  1. Barro, Robert J. & Sahasakul, Chaipat, 1986. "Average Marginal Tax Rates from Social Security and the Individual Income Tax," Scholarly Articles 3451298, Harvard University Department of Economics.
  2. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
  3. Basu, S.: Fernald, J.G., 1993. "Constant Returns and Small Markups in U.S. Manufacturing," Papers 93-19, Michigan - Center for Research on Economic & Social Theory.
  4. Jan-Ting Guo & Kevin J. Lansing, 1997. "Tax structure and welfare in a model of optimal fiscal policy," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 11-23.
  5. Jess Benhabib & Roger E.A. Farmer, 1992. "Indeterminacy and Increasing Returns," UCLA Economics Working Papers 646, UCLA Department of Economics.
  6. Chari, V V & Christiano, Lawrence J & Kehoe, Patrick J, 1994. "Optimal Fiscal Policy in a Business Cycle Model," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 617-52, August.
  7. Cooley, T.F. & Hansen, G.D., 1991. "The Distortions in a Neoclassical Monetary Economy," Papers 91-01, Rochester, Business - General.
  8. Christiano, Lawrence J., 1988. "Why does inventory investment fluctuate so much?," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 247-280.
  9. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
  10. Kenneth L. Judd, 1982. "Redistributive Taxation in a Simple Perfect Foresight Model," Discussion Papers 572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
  12. Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-18.
  13. Mendoza, Enrique G & Tesar, Linda L, 1998. "The International Ramifications of Tax Reforms: Supply-Side Economics in a Global Economy," American Economic Review, American Economic Association, vol. 88(1), pages 226-45, March.
  14. Richard Rogerson, 2010. "Indivisible Labor, Lotteries and Equilibrium," Levine's Working Paper Archive 250, David K. Levine.
  15. S. Rao Aiyagari, 1994. "Optimal capital income taxation with incomplete markets, borrowing constraints, and constant discounting," Working Papers 508, Federal Reserve Bank of Minneapolis.
  16. Ellen McGrattan & Richard Rogerson & Randall Wright, 1993. "Household production and taxation in the stochastic growth model," Staff Report 166, Federal Reserve Bank of Minneapolis.
  17. Larry E. Jones & Rodolfo E. Manuelli & Peter E. Rossi, 1993. "On the Optimal Taxation of Capital Income," NBER Working Papers 4525, National Bureau of Economic Research, Inc.
  18. Stiglitz, Joseph E & Dasgupta, P, 1971. "Differential Taxation, Public Goods and Economic Efficiency," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 151-74, April.
  19. Enrique G. Mendoza & Linda L. Tesar, 1995. "Supply-side economics in a global economy," International Finance Discussion Papers 507, Board of Governors of the Federal Reserve System (U.S.).
  20. Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
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Cited by:
  1. Kevin J. Lansing, 1995. "Optimal fiscal policy when public capital is productive: a business cycle perspective," Working Paper 9507, Federal Reserve Bank of Cleveland.

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