Optimal Dynamic Taxation with Indivisible Labour
How should a government arrange taxes on labour and capital over time? To provide an answer, we develop the field of optimal dynamic taxation further by (i) incorporating indivisible labour and (ii) analysing the short-run dynamics of the capital and labour taxes under the second-best programme. We derive two classes of preferences for which the optimal capital tax reaches zero in a finite time. If leisure is normal, the labour tax is gradually increased for a period and then kept constant, and, if leisure is neutral, labour is not taxed at all. Finally, we analyse the dynamics of labour supply under the optimal tax programme. Copyright Blackwell Publishing Ltd and The Victoria University of Manchester, 2004.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 72 (2004)
Issue (Month): s1 (09)
|Contact details of provider:|| Postal: Manchester M13 9PL|
Phone: (0)161 275 4868
Fax: (0)161 275 4812
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1463-6786
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=1463-6786|
References listed on IDEAS
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.:
- Robert B. Barsky & N. Gregory Mankiw & Stephen P. Zeldes, 1984.
"Ricardian Consumers With Keynesian Propensities,"
NBER Working Papers
1400, National Bureau of Economic Research, Inc.
- Richard Rogerson, 2010.
"Indivisible Labor, Lotteries and Equilibrium,"
Levine's Working Paper Archive
250, David K. Levine.
- Gary Hansen, 2010.
"Indivisible Labor and the Business Cycle,"
Levine's Working Paper Archive
233, David K. Levine.
- Hansen, Gary D. & Sargent, Thomas J., 1988.
"Straight time and overtime in equilibrium,"
Journal of Monetary Economics,
Elsevier, vol. 21(2-3), pages 281-308.
- Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
- S. Rao Aiyagari & Albert Marcet & Thomas J. Sargent & Juha Seppala, 2002.
"Optimal Taxation without State-Contingent Debt,"
Journal of Political Economy,
University of Chicago Press, vol. 110(6), pages 1220-1254, December.
- Chan, Louis Kuo Chi, 1983. "Uncertainty and the neutrality of government financing policy," Journal of Monetary Economics, Elsevier, vol. 11(3), pages 351-372.
- Chamley, Christophe, 1985. "Efficient Taxation in a Stylized Model of Intertemporal General Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 451-68, June.
- Jeremy Greenwood & Gregory W. Huffman, 1988. "On Modelling the Natural Rate of Unemployment with Indivisible Labour," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 587-609, August.
- Andrew Atkeson & V. V. Chari & Patrick J. Kehoe, 1999. "Taxing capital income: a bad idea," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 3-17.
- Casey B. Mulligan, 1999.
"Microfoundations and Macro Implications of Indivisible Labor,"
NBER Working Papers
7116, National Bureau of Economic Research, Inc.
- Casey B. Mulligan, 1998. "Microfoundations and macro implications of indivisible labor," Discussion Paper / Institute for Empirical Macroeconomics 126, Federal Reserve Bank of Minneapolis.
- Judd, Kenneth L., 1985.
"Redistributive taxation in a simple perfect foresight model,"
Journal of Public Economics,
Elsevier, vol. 28(1), pages 59-83, October.
- 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.
- Hamilton, Jonathan H, 1987. "Optimal Wage and Income Taxation with Wage Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 373-88, June.
When requesting a correction, please mention this item's handle: RePEc:bla:manchs:v:72:y:2004:i:s1:p:34-54. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.