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Capital taxation in a simple finite-horizon OLG model

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Blackorby, Charles and Brett, Craig (2004) Capital taxation in a simple finite-horizon OLG model. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.709).

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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.

Item Type:

Working or Discussion Paper (Working Paper)

Subjects:

H Social Sciences > HG Finance

Divisions:

Faculty of Social Sciences > Economics

Library of Congress Subject Headings (LCSH):

Capital levy, Intergenerational relations -- Economic relations, Welfare economics, Distribution (Economic theory), Income distribution

Series Name:

Warwick economic research papers

Publisher:

University of Warwick, Department of Economics

Place of Publication:

Coventry

Official Date:

April 2004

Dates:

Date	Event
April 2004	Published

Number:

No.709

Number of Pages:

Status:

Not Peer Reviewed

Access rights to Published version:

Open Access

Funder:

Social Sciences and Humanities Research Council of Canada (SSHRC)

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