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Preferences over Capital Income versus Labor Income Taxation

  • Mahieu, Géraldine

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

  • Rottier, Stéphane

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Empirical papers show that labor income and capital income are differently taxed all over the world. We investigate whether this may correspond to individual preferences. We tackle this question in an overlapping generations general equilibrium model with heterogeneous agents: young versus old and low skilled versus high skilled individuals. Taxes finance unemployment benefits and government consumption. High skilled agents prefer capital income taxes, while young unskilled and old agents prefer labor income taxation.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2000021.

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Length: 30
Date of creation: 01 Sep 2000
Date of revision:
Handle: RePEc:ctl:louvir:2000021
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  1. Bertola, Giuseppe, 1991. "Factor Shares and Savings In Endogenous Growth," CEPR Discussion Papers 576, C.E.P.R. Discussion Papers.
  2. Fiaschi, Davide, 1999. "Growth and inequality in an endogenous fiscal policy model with taxes on labor and capital," European Journal of Political Economy, Elsevier, vol. 15(4), pages 727-746, November.
  3. Ordover, J A & Phelps, Edmund S, 1975. "Linear Taxation of Wealth and Wages for Intragenerational Lifetime Justice: Some Steady-State Cases," American Economic Review, American Economic Association, vol. 65(4), pages 660-73, September.
  4. Marco Bassetto, 2008. "Political Economy of Taxation in an Overlapping-Generations Economy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 18-43, January.
  5. Renstrom, Thomas I, 1996. "Endogenous Taxation: An Overlapping Generations Approach," Economic Journal, Royal Economic Society, vol. 106(435), pages 471-82, March.
  6. Ordover, Janusz A., 1976. "Distributive justice and optimal taxation of wages and interest in a growing economy," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 139-160.
  7. Rangazas, Peter, 1989. "Redistributive Taxation in a Simple Life-Cycle Model," Economica, London School of Economics and Political Science, vol. 56(224), pages 487-503, November.
  8. Ordover, J. A. & Phelps, E. S., 1979. "The concept of optimal taxation in the overlapping-generations model of capital and wealth," Journal of Public Economics, Elsevier, vol. 12(1), pages 1-26, August.
  9. Persson, Torsten & Tabellini, Guido, 1994. "Representative democracy and capital taxation," Journal of Public Economics, Elsevier, vol. 55(1), pages 53-70, September.
  10. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 47-104, 04.
  11. Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, vol. 28(1), pages 59-83, October.
  12. Per Krusell & José-Victor Ríos-Rull, 1994. "What Constitutions Promote Capital Accumulation? A Political-Economy Approach," Wallis Working Papers WP1, University of Rochester - Wallis Institute of Political Economy.
  13. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
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