On optimal non-linear taxation and public good provision in an overlapping generations economy

Pirttilä, Jukka; Tuomala, Matti

doi:10.1016/s0047-2727(99)00105-x

Cited by 52 publications

(73 citation statements)

References 16 publications

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“…This corresponds to the results derived by Pirttilä and Tuomala (2001), yet with the exception that the self-control problem to be discussed below was absent in their study.…”

Section: ;T+2supporting

confidence: 89%

“…This approach is standard in the literature on optimal nonlinear taxation. See also earlier literature on optimal income taxation in dynamic economies; e.g., Pirttilä and Tuomala (2001) and Aronsson and Johansson-Stenman (2010). 5 Note that Proposition 1 applies irrespective of whether the consumers are naive (erroneously expect not to su¤er from the self-control problem in future periods) or sophisticated (in which case the consumer implements a plan that his/her future selves will follow).…”

Section: ;T+2mentioning

confidence: 99%

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Public goods and optimal paternalism under present-biased preferences

Aronsson

Granlund

2011

Economics Letters

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“…This corresponds to the results derived by Pirttilä and Tuomala (2001), yet with the exception that the self-control problem to be discussed below was absent in their study.…”

Section: ;T+2supporting

confidence: 89%

Section: ;T+2mentioning

confidence: 99%

Public goods and optimal paternalism under present-biased preferences

Aronsson

Granlund

2011

Economics Letters

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“…Endogenous factor prices determined in general equilibrium in a closed economy do not affect the characterization of optimal tax rules derived below if labor types are perfect substitutes in production and production displays constant returns to scale (see Diamond and Mirrlees 1971). If labor types are imperfect substitutes, however, Pirttilä and Tuomala (2001) show that the production efficiency theorem fails and capital income is optimally taxed or subsidized. 8 Cameron and Heckman (2001) and Carneiro and Heckman (2002) argue that liquidity constraints are only of minor importance empirically.…”

Section: Preferences and Technologiesmentioning

confidence: 99%

Human capital and optimal positive taxation of capital income

Jacobs

Bovenberg

2009

Int Tax Public Finance

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This paper analyzes optimal linear and non-linear taxes on capital and labor incomes in a life-cycle model of human capital investment, financial savings, and labor supply with heterogenous individuals. A dual income tax with a positive marginal tax rate on not only labor income but also capital income is optimal. The positive tax on capital income serves to alleviate the distortions of the labor tax on human capital accumulation. The optimal marginal tax rate on capital income is lower than that on labor income if savings are elastic compared to investment in human capital, substitution between verifiable and non-verifiable inputs in human capital formation is difficult, and most investments in human capital are verifiable so that education subsidies can directly reduce the tax wedge on learning. Numerical calculations suggest that the optimal marginal tax rate on capital income is substantial.

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“…allowing for the possibility of endogenous relative wages, was introduced by Pirttilä and Tuomala (2001) in order to analyze capital taxation and public good provision.…”

Section: Introductionmentioning

confidence: 99%

The effects of population aging on optimal redistributive taxes in an overlapping generations model

Brett

2011

Int Tax Public Finance

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The impact of population aging on the steady state solution to a Ordover and Phelps (1979) overlapping generations optimal nonlinear income tax problem with two types of workers and quasilinear-in-leisure preferences is investigated. A decrease in the rate of population growth, which leads to an aging population, increases the relative price of consumption per person in retirement, which tends to decrease optimal consumption for retirees of both skill types. It is also shown that the optimal steady state rate of interest equals the rate of population growth. As a result, the steady state interest rate unambiguously declines when the rate of population growth declines. The resulting adjustments in production plans has an ambiguous effect on the aggregate wage rate. This article identifies factors contributing to an increase in the aggregate wage when the population ages, namely normality of consumption in retirement, complementarity between capital and labor in production, and a large capital deepening effect relative to the increase in dependency owing to demographic change. Depending on the sign of this wage effect, ambiguities may arise in the direction of change in the optimal steady state consumption and production plans. It is also shown that the optimal marginal income tax rates are independent of the rate of population growth.JEL classification: D82, H21

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On optimal non-linear taxation and public good provision in an overlapping generations economy

Cited by 52 publications

References 16 publications

Public goods and optimal paternalism under present-biased preferences

Public goods and optimal paternalism under present-biased preferences

Human capital and optimal positive taxation of capital income

The effects of population aging on optimal redistributive taxes in an overlapping generations model

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