IDEAS home Printed from https://ideas.repec.org/a/bla/jpbect/v27y2025i5ne70065.html

Skill‐Biased Technological Changes, Nonseparable Utility, and Dynamic Optimal Capital Tax

Author

Listed:
  • Qiongqiong Li
  • Wenjian Li

Abstract

This paper examines the optimal dynamic taxation of capital in the context of skill‐biased technological change. The study reveals that the widening wage gap, coupled with the complementarity between consumption and leisure, provides a novel rationale for capital taxation. We demonstrate that taxing capital is beneficial in economies experiencing persistent skill‐biased technological advancements, even if the capital is skill‐neutral and the complementarity between consumption and leisure is time invariant. Converse results appear when leisure substitutes for consumption. Statistics‐based optimal tax formulas are provided to show how the government can dynamically mitigate the impacts of various technological changes through the utilization of labor and capital income taxes.

Suggested Citation

  • Qiongqiong Li & Wenjian Li, 2025. "Skill‐Biased Technological Changes, Nonseparable Utility, and Dynamic Optimal Capital Tax," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 27(5), October.
    • Handle: RePEc:bla:jpbect:v:27:y:2025:i:5:n:e70065
    DOI: 10.1111/jpet.70065
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/jpet.70065
    Download Restriction: no
    File URL: https://libkey.io/10.1111/jpet.70065?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jpbect:v:27:y:2025:i:5:n:e70065. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/apettea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.