IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Investment Risk, Pareto Distribution, and the Effects of Tax

  • NIREI Makoto

This paper investigates the effects of taxation on the distributions of income and wealth and on the welfare of heterogeneous households. I first demonstrate that the tails of income and wealth distributions converge to a Pareto distribution in a Bewley model in which households bear idiosyncratic investment shocks. This result extends the previous analysis in Nirei (2009). Thereafter, a non-distortionary tax and flat-rate taxes on capital income and consumption are introduced, and their impacts on aggregate wealth, the inequality index, households' welfare, and transition paths are quantitatively investigated. When the tax rate is set to generate the same GDP-government expenditure ratio, the model with capital tax generates smaller aggregate wealth and a smaller inequality index than the case with consumption tax or non-distortionary tax.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.rieti.go.jp/jp/publications/dp/11e015.pdf
Download Restriction: no

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11015.

as
in new window

Length: 36 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:eti:dpaper:11015
Contact details of provider: Postal: 11th floor, Annex, Ministry of Economy, Trade and Industry (METI) 1-3-1, Kasumigaseki Chiyoda-ku, Tokyo, 100-8901
Phone: +81-3-3501-1363
Fax: +81-3-3501-8577
Web page: http://www.rieti.go.jp/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August.
  2. Marco Cagetti & Mariacristina De Nardi, 2004. "Taxation, entrepreneurship, and wealth," Staff Report 340, Federal Reserve Bank of Minneapolis.
  3. Francisco Covas, 2005. "Uninsured Idiosyncratic Production Risk With Borrowing Constraints," Computing in Economics and Finance 2005 198, Society for Computational Economics.
  4. Sagiri Kitao, 2008. "Entrepreneurship, taxation and capital investment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 44-69, January.
  5. Huggett, Mark, 1996. "Wealth distribution in life-cycle economies," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 469-494, December.
  6. Fatih Guvenen & Burhanettin Kuruscu & Serdar Ozkan, 2009. "Taxation of human capital and wage inequality: a cross-country analysis," IFS Working Papers W09/23, Institute for Fiscal Studies.
  7. Ana Castaneda & Javier Diaz-Gimenez & Jose-Victor Rios-Rull, 2003. "Accounting for the U.S. Earnings and Wealth Inequality," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 818-857, August.
  8. Nirei, Makoto, 2009. "Pareto Distributions in Economic Growth Models," IIR Working Paper 09-05, Institute of Innovation Research, Hitotsubashi University.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:11015. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (NUKATANI Sorahiko)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.