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Capital Taxation In A Simple Finite-Horizon Olg Model

Author

Listed:
  • Blackorby, Charles

    (Department of Economics, University of Warwick and GREQAM)

  • Brett, Craig

    (Department of Economics, Mount Allison University)

Abstract

In a simple finite-horizon overlapping-generations model where the government has the power to levy commodity taxes and to implement uniform lump-sum transfers, and individuals as well as the government can purchase units of a storable good in order to transfer resources from the present to the future, we derive the equations that implicitly define the taxes and subsidies that are part of the second-best Pareto optima. In this context we first show that there is production efficiency. We then show that taxes on capital income/savings are required at almost all Pareto optima. Finally we show that there are no restriction on preferences or technologies that are consistent with a general exemption of capital income/savings from the tax base.

Suggested Citation

  • Blackorby, Charles & Brett, Craig, 2004. "Capital Taxation In A Simple Finite-Horizon Olg Model," The Warwick Economics Research Paper Series (TWERPS) 709, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:709
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    File URL: https://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp709.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alan Krause, 2004. "The Dynamic Process of Tax Reform," Econometric Society 2004 Australasian Meetings 119, Econometric Society.
    2. Gerhard Glomm & Juergen Jung, 2013. "The Timing of Redistribution," Southern Economic Journal, Southern Economic Association, vol. 80(1), pages 50-80, July.

    More about this item

    Keywords

    overlapping generations ; capital taxes ; tax-reform;

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D6 - Microeconomics - - Welfare Economics
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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