How far are we from the slippery slope? The Laffer curve revisited

Mathias Trabandt and Harald Uhlig ()

No 2006-023, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

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
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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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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb649:sfb649dp2006-023

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