Optimal Dynamic Taxation with Indivisible Labour
In this Paper, we take the field of optimal dynamic taxation further in two directions. Using a model with invisible labour, as in Hansen (1986) and Rogerson (1988), we first explore the short-run dynamics of the capital-income tax, particularly whether the tax, under the second-best programme, goes to zero in finite or infinite time. We derive two classes of preferences for which the optimal capital tax reaches zero in a finite time. Second, we ask what preference structures will leave labour untaxed at all times? An exponential preference structure is derived, for which labour is untaxed both in the short and long run.
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- Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
- Jeremy Greenwood & Gregory W. Huffman, 1988. "On Modelling the Natural Rate of Unemployment with Indivisible Labour," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 587-609, August.
- Reinhorn Leslie J., 2009.
"Dynamic Optimal Taxation with Human Capital,"
The B.E. Journal of Macroeconomics,
De Gruyter, vol. 9(1), pages 1-21, October.
- Leslie Reinhorn, 2004. "Dynamic optimal taxation with human capital," Money Macro and Finance (MMF) Research Group Conference 2003 77, Money Macro and Finance Research Group.
- Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
- Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, vol. 28(1), pages 59-83, October.
- Kenneth L. Judd, 1982. "Redistributive Taxation in a Simple Perfect Foresight Model," Discussion Papers 572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Jones, Larry E. & Manuelli, Rodolfo E. & Rossi, Peter E., 1997. "On the Optimal Taxation of Capital Income," Journal of Economic Theory, Elsevier, vol. 73(1), pages 93-117, March.
- Casey B. Mulligan, 1998. "Microfoundations and macro implications of indivisible labor," Discussion Paper / Institute for Empirical Macroeconomics 126, Federal Reserve Bank of Minneapolis.
- Casey B. Mulligan, 1999. "Microfoundations and Macro Implications of Indivisible Labor," NBER Working Papers 7116, National Bureau of Economic Research, Inc.
- Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
- Andrew Atkeson & V. V. Chari & Patrick J. Kehoe, 1999. "Taxing capital income: a bad idea," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 3-17.
- Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June. Full references (including those not matched with items on IDEAS)
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