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The Stationary Distribution of Wealth under Progressive Taxation

  • Daniel R. Carroll

    (University of Virginia)

  • Eric R. Young

    (University of Virginia)

This paper considers the long-run distribution of capital holdings in a model with complete asset markets and progressive taxation. Households are assumed to be heterogeneous in their labor market productivity. We show that this model is capable of producing a nondegenerate determinate wealth distribution. However, it also predicts that capital and labor income will be negatively correlated. These results are robust to the introduction of elastic labor supply and borrowing constraints. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2008.09.002
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 12 (2009)
Issue (Month): 3 (July)
Pages: 469-478

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Handle: RePEc:red:issued:07-101
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