Are Progressive Income Taxes Stabilizing? : A Reply
AbstractDromel and Pintus [Are Progressive Income Taxes Stabilizing?, Journal of Public Economic Theory 10, (2008) 329-349] have shown that labor-income tax progressivity reduces the likelihood of local indeterminacy, sunspots and cycles in a one sector monetary economy with constant returns to scale. In this note, we extend Dromel and Pintus (2008) into a two sector monetary economy with constant returns to scale studied by Bosi et al. (2007) and reassess the stabilizing effect of progressive income taxes. We show that the result in Dromel and Pintus (2008) is robust to this extension, which means that changes of the production structure won't affect the stabilizing effect of progressive income taxes, i.e., tax progressivity (regressivity) reduces (increases) the likelihood of local indeterminacy, sunspots and cycles.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 11460.
Date of creation: 06 Nov 2008
Date of revision:
Tax Progressivity; local indeterminacy;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- P35 - Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-11 (All new papers)
- NEP-MAC-2008-11-11 (Macroeconomics)
- NEP-PUB-2008-11-11 (Public Finance)
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