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Optimal taxation and borrowing constraints

Author

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  • Nathalie Mathieu-Bolh

    (Department of Economics, University of Vermont, 94, University Place, Burlington, VT 05405 United State of America.)

Abstract

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.

Suggested Citation

  • Nathalie Mathieu-Bolh, 2011. "Optimal taxation and borrowing constraints," Economía, Instituto de Investigaciones Económicas y Sociales (IIES). Facultad de Ciencias Económicas y Sociales. Universidad de Los Andes. Mérida, Venezuela, vol. 36(31), pages 9-53, January-j.
  • Handle: RePEc:ula:econom:v:36:y:2011:i:31:p:9-53
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    References listed on IDEAS

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    Cited by:

    1. Nathalie Mathieu-Bolh, 2011. "Optimal Taxation and Income Mobility with Borrowing Limits," Public Finance Review, , vol. 39(3), pages 393-428, May.

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    More about this item

    Keywords

    Optimal taxation; borrowing constraints; overlapping generations.;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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