Transition Losses of Partially Mobile Industry-Specific Capital
Comparative static models typically assume homogeneous and mobile factors in estimating the economic effects of a tax policy change. Even dynamic models employ a given homogeneous capital stock in two different al locations for the first period of two equilibrium sequences. This malleable capital assumption causes overstatement of early efficiency gains from policies designed to improve factor allocation. on the other hand, immobile factor models would understate such gains by assuming that no capital ever relocates. The model in this paper attempts to bridge this gap by restricting each industry's capital reduction to its rate of depreciation. The stock of depreciated capital from the previous period represents an industry-specific type of capital which may earn a lower equilibrium return. The usage of mobile capital above this minimum constraint is limited by the total gross saving of the economy, including all industries' depreciation and consumer net saving. The industry-specific capital model suggests, for example, that previous estimates of the dynamic efficiency gain from full integration of personal and corporate taxes in the U.S. are overstated by about $5 billion. The model could also be used to estimate distributional impacts on individuals with more than proportionate ownership of capital in particular industries.
|Date of creation:||Jul 1980|
|Date of revision:|
|Publication status:||published as Fullerton, Don. "Transition Losses of Partially Mobile Industry-Specific Captial." Quarterly Journal of Economics, Vol. 98, No. 1, February 1983, pp. 107-125.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
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.:
- Shoven, John B. & Whalley, John, 1972.
"A general equilibrium calculation of the effects of differential taxation of income from capital in the U.S,"
Journal of Public Economics,
Elsevier, vol. 1(3-4), pages 281-321, November.
- John B. Shoven & John Whalley, 1972. "A General Equilibrium Calculation of the Effects of Differential Taxation of Income from Capital in the U.S," Cowles Foundation Discussion Papers 328, Cowles Foundation for Research in Economics, Yale University.
- Boskin, Michael J, 1978. "Taxation, Saving, and the Rate of Interest," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages S3-27, April.
- 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.
- Charles L. Ballard & Don Fullerton & John B. Shoven & John Whalley, 1985. "General Equilibrium Analysis of Tax Policies," NBER Chapters, in: A General Equilibrium Model for Tax Policy Evaluation, pages 6-24 National Bureau of Economic Research, Inc.
- Martin Feldstein, 1974. "Incidence of a Capital Income Tax in a Growing Economy with Variable Savings Rates," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 505-513.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0520. 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: ()
If references are entirely missing, you can add them using this form.