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The Welfare Cost of Factor Taxation in a Perfect-Foresight Model

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Listed author(s):
  • Judd, Kenneth L

Abstract

This paper examines the marginal efficiency cost of various factor taxes in a dynamic general-equilibrium model. The au thor solves for the excess burden of anticipated and unanticipated, t emporary and permanent, tax policies. Using a range of estimates for taste and technology parameters, he finds excess burdens larger than those indicated by previous studies that use static models. These exc ess burdens are sensitive to parameter values and timing. However, th e rankings of alternative tax policies turn out to be insensitive to structural parameter values. Copyright 1987 by University of Chicago Press.

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File URL: http://dx.doi.org/10.1086/261481
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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 95 (1987)
Issue (Month): 4 (August)
Pages: 675-709

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Handle: RePEc:ucp:jpolec:v:95:y:1987:i:4:p:675-709
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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  1. Auerbach, Alan J & Kotlikoff, Laurence J & Skinner, Jonathan, 1983. "The Efficiency Gains from Dynamic Tax Reform," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(1), pages 81-100, February.
  2. Fullerton, Don, 1982. "On the possibility of an inverse relationship between tax rates and government revenues," Journal of Public Economics, Elsevier, vol. 19(1), pages 3-22, October.
  3. Berndt, Ernst R, 1976. "Reconciling Alternative Estimates of the Elasticity of Substitution," The Review of Economics and Statistics, MIT Press, vol. 58(1), pages 59-68, February.
  4. Feldstein, Martin & Dicks-Mireaux, Louis & Poterba, James, 1983. "The effective tax rate and the pretax rate of return," Journal of Public Economics, Elsevier, vol. 21(2), pages 129-158, July.
  5. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  6. Judd, Kenneth L, 1985. "Short-run Analysis of Fiscal Policy in a Simple Perfect Foresight Model," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 298-319, April.
  7. Hansen, Lars Peter & Singleton, Kenneth J, 1983. "Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 249-265, April.
  8. Michael Rothschild, 1971. "On the Cost of Adjustment," The Quarterly Journal of Economics, Oxford University Press, vol. 85(4), pages 605-622.
  9. Feldstein, Martin S, 1978. "The Welfare Cost of Capital Income Taxation," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 29-51, April.
  10. Martin Feldstein, 1974. "Incidence of a Capital Income Tax in a Growing Economy with Variable Savings Rates," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 505-513.
  11. Browning, Edgar K, 1976. "The Marginal Cost of Public Funds," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 283-298, April.
  12. Chamley, Christophe, 1981. "The Welfare Cost of Capital Income Taxation in a Growing Economy," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 468-496, June.
  13. Martin S. Feldstein, 1974. "Tax Incidence in a Growing Economy with Variable Factor Supply," The Quarterly Journal of Economics, Oxford University Press, vol. 88(4), pages 551-573.
  14. E. S. Phelps & R. A. Pollak, 1968. "On Second-Best National Saving and Game-Equilibrium Growth," Review of Economic Studies, Oxford University Press, vol. 35(2), pages 185-199.
  15. Fullerton, Don, et al, 1981. "Corporate Tax Integration in the United States: A General Equilibrium Approach," American Economic Review, American Economic Association, vol. 71(4), pages 677-691, September.
  16. Brock, William A & Turnovsky, Stephen J, 1981. "The Analysis of Macroeconomic Policies in Perfect Foresight Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(1), pages 179-209, February.
  17. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
  18. Lucas, Robert E, Jr & Rapping, Leonard A, 1969. "Real Wages, Employment, and Inflation," Journal of Political Economy, University of Chicago Press, vol. 77(5), pages 721-754, Sept./Oct.
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