Optimal Taxation with Consumption Time as a Leisure or Labor Substitute
AbstractThis paper studies the optimal commodity taxation problem when time taken in consumption is a perfect substitute for either labor or leisure. It shows that while labor substitutability affects the optimal tax structure, leisure substitutability leaves the classical optimal tax results intact. In the Ramsey tax framework with linear income taxes, whether the consumers have the same or different earning abilities, labor substitutes tend to be taxed at a higher rate than leisure substitutes with the tax differential being increasing in consumption time. This is not necessarily the case when one allows for nonlinear income taxation.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 1068.
Length: 41 pages
Date of creation: Jan 2006
Date of revision:
Publication status: Forthcoming in Journal of Public Economics
consumption time; labor substitutes; leisure substitutes; optimal taxation;
Other versions of this item:
- Boadway, Robin & Gahvari, Firouz, 2006. "Optimal taxation with consumption time as a leisure or labor substitute," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1851-1878, November.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-06-03 (All new papers)
- NEP-PBE-2006-06-03 (Public Economics)
- NEP-PUB-2006-06-03 (Public Finance)
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