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- W2071477988 abstract "This paper analyzes the Markov-perfect equilibrium of an economy were a benevolent government that lacks the ability to commit to future policy choices, uses taxes on capital and labor income to finance the provision of a public good. The main finding is that the government taxes capital and subsidizes labor so that only the dynamic inefficiency of future capital taxes remains. If agents’ preference for the public good is sufficiently high, then capital is confiscated. Setting bounds on taxes alleviates the dynamic inefficiency inherent in capital taxation, but some implementations carry a high welfare cost. Allowing for endogenous capital utilization makes the current capital tax distortionary and implies capital and labor tax rates that are relatively close to those measured for the U.S. economy." @default.
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- W2071477988 date "2010-03-01" @default.
- W2071477988 modified "2023-10-03" @default.
- W2071477988 title "Markov-perfect capital and labor taxes" @default.
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- W2071477988 doi "https://doi.org/10.1016/j.jedc.2009.10.006" @default.
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