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• W2792286759 abstract "Abstract This paper examines the instability property of balanced-budget taxation on factor income and consumption in a two-sector real business cycle model with home production. We show that the presence of home production, which is a nontaxed sector, reinforces the intratemporal and intertemporal substitution effects of balanced-budget rules. As a result, it strengthens the destabilization effect of factor income taxes and weakens the stabilization effect of consumption taxes. Moreover, our calibration shows that the number of OECD countries’ tax-rate combinations that fall into the instability region rises when home goods account for a larger share of aggregate consumption, and hence persistent cycles can easily occur following a fundamental shock or a sunspot shock." @default.
• W2792286759 created "2018-03-29" @default.
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• W2792286759 date "2018-06-01" @default.
• W2792286759 modified "2023-09-27" @default.
• W2792286759 title "Home production, balanced-budget taxation and economic (in)stability" @default.
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• W2792286759 doi "https://doi.org/10.1016/j.jmacro.2018.02.003" @default.
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