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Optimal Taxation in a Life-Cycle Model

Author

Listed:
  • Yvette Alvarez
  • John Burbidge
  • Ted Farrell
  • Leigh Palmer

Abstract

The authors extend Deaton's atemporal optimal commodity tax model to a life-cycle environment in which the individual may choose to work in many periods. The authors are able to confirm the Corlett-Hague intuition--goods that are more complementary with leisure should be taxed at higher rates. In addition, they prove that, in the microeconomic framework underlying some popular general-equilibrium models, if real wage and interest rates are constant over the life cycle, the addition of some interest taxation to a consumption tax regime would be welfare improving and that optimal labor tax rates decline with age. Coauthors are John Burbidge, Ted Farrell, and Leigh Palmer.

Suggested Citation

  • Yvette Alvarez & John Burbidge & Ted Farrell & Leigh Palmer, 1992. "Optimal Taxation in a Life-Cycle Model," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 111-122, February.
  • Handle: RePEc:cje:issued:v:25:y:1992:i:1:p:111-22
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    Citations

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    Cited by:

    1. Erosa, Andres & Gervais, Martin, 2002. "Optimal Taxation in Life-Cycle Economies," Journal of Economic Theory, Elsevier, vol. 105(2), pages 338-369, August.
    2. Papageorgiou, Yorgos Y. & Pines, David, 2000. "Externalities, Indivisibility, Nonreplicability, and Agglomeration," Journal of Urban Economics, Elsevier, vol. 48(3), pages 509-535, November.
    3. Cagri S. Kumru & John Piggott, 2017. "Optimal Capital Income Taxation with Means-tested Benefits," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(3), pages 227-262, July.
    4. Krueger, Dirk & Ludwig, Alexander, 2016. "On the optimal provision of social insurance: Progressive taxation versus education subsidies in general equilibrium," Journal of Monetary Economics, Elsevier, vol. 77(C), pages 72-98.
    5. Gerhard Glomm & Juergen Jung, 2013. "The Timing of Redistribution," Southern Economic Journal, Southern Economic Association, vol. 80(1), pages 50-80, July.
    6. Robin Boadway & David Wildasin, 1994. "Taxation and savings: a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 15(3), pages 19-63, August.
    7. Panousi, Vasia, 2009. "Capital Taxation with Entrepreneurial Risk," MPRA Paper 24237, University Library of Munich, Germany.
    8. Andres Erosa & Martin Gervais, 2001. "Optimal taxation in infinitely-lived agent and overlapping generations models : a review," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 23-44.
    9. repec:eee:hapoch:v1_713 is not listed on IDEAS
    10. Alok Johri & Bidyut Kumar Talukdar, 2011. "Organizational Capital and Optimal Ramsey Taxation," Department of Economics Working Papers 2011-09, McMaster University.
    11. J.B. Burbidge, 2001. "Awkward Moments in Teaching Public Finance," Department of Economics Working Papers 2001-01, McMaster University.

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