On the role of progressive taxation in a Ramsey model with heterogeneous households

Bosi, Stefano; Seegmuller, Thomas

doi:10.1016/j.jmateco.2010.08.005

Cited by 8 publications

(12 citation statements)

References 29 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…For example, using a Ramsey model, Sorger () shows how there may in fact be infinitely many nondegenerate stationary distributions if the marginal tax rate is constant on nontrivial intervals. Bosi and Seegmuller () draw attention to steady‐state distributions in which the patient supply capital and the impatient supply labor.…”

mentioning

confidence: 99%

The Dynamics of Growth and Income Inequality under Progressive Taxation

Koyuncu

Turnovsky

2016

J Public Economic Theory

View full text Add to dashboard Cite

This paper develops an endogenous growth model having a progressive income tax structure in which heterogeneous agents, who differ in terms of their rates of time preference, supply labor elastically. We analyze the dynamic adjustment to an increase in progressivity and show that the economy will converge to an equilibrium growth path with nondegenerate distributions of both income and wealth. The role of the endogeneity of labor supply is emphasized and shown to have a major impact on the nature of the transitional path, as a result of the impact of the progressive tax on agents' work incentives. Our theoretical analysis is supplemented with, and supported by, numerical simulations, which generally match the empirical evidence rather closely. We also show that the responses of the different income groups contrast sharply from one another so that focusing on the economy-wide average provides an incomplete picture.

show abstract

mentioning

confidence: 99%

The Dynamics of Growth and Income Inequality under Progressive Taxation

Koyuncu

Turnovsky

2016

J Public Economic Theory

View full text Add to dashboard Cite

show abstract

“…This has been investigated by Bosi and Seegmuller (2010b), considering wasteful government expenditures and progressive taxation on capital and labor incomes.…”

Section: Introductionmentioning

confidence: 99%

“…When public spending financed through a balanced-budget rule in the Ramsey model with many agents is introduced, indeterminacy, and therefore sunspot fluctuations, can arise. This has been investigated by Bosi and Seegmuller (2010b), assuming wasteful government expenditures and progressive taxation on capital and labor incomes. 1 Their paper emphasizes that the multiplicity of equilibria is mainly explained by the intertemporal choice of the most patient agent when affected by nonlinear capital taxation.…”

Section: Introductionmentioning

confidence: 99%

“…In this paper we still focus on government intervention as a source of expectation-driven fluctuations. But contrary to Bosi and Seegmuller (2010b), we assume that public spending is useful, as it improves households' utility of consumption as an externality. In such a framework, we will show that even with linear taxation, the intertemporal choices of the most patient household are affected in such a way that sunspot fluctuations become compatible with capital income monotonicity, giving plausible values of the elasticity of capital-labor substitution.…”

Section: Introductionmentioning

confidence: 99%

“…However, in all these papers, local indeterminacy and Hopf bifurcations are ruled out. Expectation-driven fluctuations can be obtained if non-linear tax rates are introduced, but this still requires a weak input substitutability (Bosi and Seegmuller (2010b)). …”

mentioning

confidence: 99%

See 2 more Smart Citations

Public Spending as a Source of Endogenous Business Cycles in a Ramsey Model With Many Agents

et al. 2014

Self Cite

View full text Add to dashboard Cite

We introduce public spending, financed through income taxation, in the Ramsey model with heterogeneous agents. Public spending as a source of welfare generates more complex dynamics. In contrast to previous contributions focusing on similar models but with wasteful public spending, limit cycles through Hopf bifurcation and expectation-driven fluctuations appear if the degree of capital-labor substitution is large enough to be compatible with capital income monotonicity. Moreover, unlike frameworks with a representative agent, our results do not require externalities in production and are compatible with a weakly elastic labor supply with respect to wage.JEL classification: C62, E32, H23.

show abstract

Progressive taxation as an automatic destabilizer under endogenous growth

Chen

Guo

2018

J Econ

View full text Add to dashboard Cite

It has been shown that in an otherwise standard one-sector real business cycle model with an indeterminate steady state under laissez faire, su¢ ciently progressive income taxation may stabilize the economy against aggregate ‡uctuations caused by agents'animal spirits. We show that this previous …nding can be overturned within an identical model which allows for sustained endogenous growth. Speci…cally, progressive taxation may operate like an automatic destabilizer that leads to equilibrium indeterminacy and sunspotdriven cyclical ‡uctuations in an endogenously growing macroeconomy. This instability result is obtained under two tractable progressive tax policy formulations that have been considered in the existing literature.

show abstract

On the role of progressive taxation in a Ramsey model with heterogeneous households

Cited by 8 publications

References 29 publications

The Dynamics of Growth and Income Inequality under Progressive Taxation

The Dynamics of Growth and Income Inequality under Progressive Taxation

Public Spending as a Source of Endogenous Business Cycles in a Ramsey Model With Many Agents

Progressive taxation as an automatic destabilizer under endogenous growth

Contact Info

Product

Resources

About