Tax Policy in a Life Cycle Model
This study departs from earlier analyses of the effects of taxes on capital income in several respects. Probably the most important difference between this treatment and most preceding ones lies in the assumptions about the interest elasticity of saving. It is shown below that the common two-period formulation of saving decisions yields quite misleading results. A more realistic model of life cycle savings demonstrates that, for a wide variety of plausible parameter values, savings are very interest elastic. This implies that shifting away from capital income taxation would significantly increase capital formation, making possible long-run increases in consumption.
|Date of creation:||Nov 1978|
|Date of revision:|
|Publication status:||published as Summers, Lawrence H. "Capital Taxation and Accumulation in a Life Cycle Growth Model." The American Economic Review, Vol. 71, No. 4, (September 1981),pp. 533-544.|
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- Michael J. Boskin, 1978. "Taxation, Saving, and the Rate of Interest," NBER Chapters, in: Research in Taxation, pages 3-27 National Bureau of Economic Research, Inc.
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- Martin Feldstei & Jerry Green & Eytan Sheshinski, 1978.
"Inflation and Taxes in a Growing Economy with Debt and Equity Finance,"
in: Research in Taxation, pages 53-70
National Bureau of Economic Research, Inc.
- Feldstein, Martin S & Green, Jerry R & Sheshinski, Eytan, 1978. "Inflation and Taxes in a Growing Economy with Debt and Equity Finance," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages S53-70, April.
- Martin Feldstein & Jerry Green & Eytan Sheshinski, 1983. "Inflation and Taxes in a Growing Economy with Debt and Equity Finance," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 44-60 National Bureau of Economic Research, Inc.
- Sheshinski, Eytan & Feldstein, Martin & Green, Jerry & Auerbach, Alan, 1978. "Inflation and Taxes in a Growing Economy with Debt and Equity Finance," Scholarly Articles 3203645, Harvard University Department of Economics.
- Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-57, August.
- Martin Feldstein & Lawrence Summers, 1977. "Is the Rate of Profit Falling?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(1), pages 211-228.
- Drazen, Allan, 1978. "Government Debt, Human Capital, and Bequests in a Life-Cycle Model," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 505-16, June.
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