IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Innovation and the Long-Run Elasticity of Total Taxable Income

Listed author(s):
  • Benjamin Russo


    (Economics Department, Belk College of Business, The University of North Carolina at Charlotte, 9201 University City Boulevard, Charlotte, NC 28223, USA)

Registered author(s):

    The elasticity of taxable income determines revenue and welfare responses to taxes. Measurement of this elasticity is an ongoing focus of tax policy research. Empirical studies report short-run elasticities. However, general equilibrium relationships can cause short-run and long-run elasticities to diverge. This paper uses a Computable General Equilibrium simulation model to construct long-run taxable income elasticities. The model differs from most previous simulation analyses of tax policy by its inclusion of endogenous, profit-motivated Research and Development and innovation. The results indicate that (i) taxable income elasticities can be relatively large, even if tax rate changes initially have only modest effects on labor supply and saving; (ii) total taxable income could be much more responsive to the corporate tax than to the individual tax; and (iii) the elasticities are substantially larger under endogenous innovation than under exogenous innovation. Together the results indicate an increase in the likelihood that the incidence of capital income taxes shifts away from capital as economies evolve toward higher levels of innovation.

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below under "Related research" whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Article provided by Southern Economic Association in its journal Southern Economic Journal.

    Volume (Year): 75 (2009)
    Issue (Month): 3 (January)
    Pages: 798-828

    in new window

    Handle: RePEc:sej:ancoec:v:75:3:y:2009:p:798-828
    Contact details of provider: Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:sej:ancoec:v:75:3:y:2009:p:798-828. 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: (Laura Razzolini)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.