How Far Are We From the Slippery Slope? The Laffer Curve Revisited

Harald Uhlig () and Mathias Trabandt

No 5657, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The goal of this paper is to examine the shape of the Laffer curve quantitatively in a simple neoclassical growth model calibrated to the US as well as to the EU-15 economy. We show that the US and the EU-15 area are located on the left side of their labor and capital tax Laffer curves, but the EU-15 economy being much closer to the slippery slopes than the US. Our results indicate that since 1975 the EU-15 area has moved considerably closer to the peaks of their Laffer curves. We find that the slope of the Laffer curve in the EU-15 economy is much flatter than in the US which documents a much higher degree of distortions in the EU-15 area. A dynamic scoring analysis shows that more than one half of a labor tax cut and more than four fifth of a capital tax cut are self-financing in the EU-15 economy.

Keywords: Laffer curve; Us and eu-15 economy (search for similar items in EconPapers)
JEL-codes: E0 E60 H0 (search for similar items in EconPapers)
Date: 2006-05
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pbe
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Citations: View citations in EconPapers (50)

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Related works:
Working Paper: How far are we from the slippery slope? The Laffer curve revisited (2010)
Working Paper: How Far Are We From The Slippery Slope? The Laffer Curve Revisited (2009)
Working Paper: How far are we from the slippery slope? The Laffer curve revisited (2006)
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