Several recent papers on dynamically optimal taxation have derived an indeterminacy result regarding state-contingent capital taxation in stochastic models with state-contingent government liabilities. The indeterminacy arises because the government has N degrees of freedom to set tax rates on capital income in N states of nature, only subject to a single constraint that assures an optimal level of capital investment. The paper shows that this indeterminacy result is a consequence of the assumption that the economy has only a single production technology. If there are many technologies, there will be additional constraints, because differences in capital income tax rates in different states of nature will create incentives to invest in those technologies that have high payoffs in states with relatively low tax rates. If there are a large number of technologies, both the structure of capital tax rates and the structure of government debt are tied down in many dimensions.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)