Optimal taxation and borrowing constraints
I propose a new overlapping generations model, in which individuals face different income levels, life expectancies and borrowing constraints to study Ramsey optimal taxation. Contrary to previous contributions, I find that optimal capital income taxation generally differs from zero in the long term even when preferences are additively separable. I also find that the tax system should generally incorporate a progressive capital income tax in the long run. Furthermore, the model enables to disentangle the respective roles of finite life horizons, productivity differences and borrowing limits.
Volume (Year): 36 (2011)
Issue (Month): 31 (January-june)
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