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Optimal Taxation in a Simple Model of Human Capital Accumulation

Author

Listed:
  • Claudia Hermeling

    (University of Karlsruhe)

  • Martin Barbie

    (University of Karlsruhe)

Abstract

This paper studies optimal taxation in dynamic economies with a simple form of human capital accumulation as considered in Bull (1993). We show that in a Ramsey equilibrium along any balanced growth path, the taxes on wage income and (physical) capital income must be zero. Under the assumption on preferences of Bull (1993), we extend his result by showing that along a balanced growth all optimal taxes are necessarily zero.

Suggested Citation

  • Claudia Hermeling & Martin Barbie, 2006. "Optimal Taxation in a Simple Model of Human Capital Accumulation," Economics Bulletin, AccessEcon, vol. 5(5), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-05e60007
    as

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    References listed on IDEAS

    as
    1. Nicholas Bull, 1993. "When all the optimal dynamic taxes are zero," Working Paper Series / Economic Activity Section 137, Board of Governors of the Federal Reserve System (U.S.).
    2. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
    3. Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 55-93.
    4. Jones, Larry E. & Manuelli, Rodolfo E. & Rossi, Peter E., 1997. "On the Optimal Taxation of Capital Income," Journal of Economic Theory, Elsevier, vol. 73(1), pages 93-117, March.
    5. Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, vol. 28(1), pages 59-83, October.
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    Citations

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    Cited by:

    1. Christoph Braun, 2010. "Taxing Human Capital: A Good Idea," Ruhr Economic Papers 0202, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    2. Braun, Christoph, 2010. "Taxing Human Capital: A Good Idea," Ruhr Economic Papers 202, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

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    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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