Second-Best Optimal Taxation of Capital and Labor in a Developing Economy

Cecilia Garcia-Penalosa and Stephen J Turnovsky

No 307, IDEP Working Papers from Institut d'economie publique (IDEP), Marseille, France

Abstract: This paper examines how the tax burden in a developing economy should be distributed between capital income and labor income. We study a two-sector model, where the traditional sector is "informal" and consequently cannot be taxed by the government. In this set up, we find that the optimal (second-best) tax structure in order to raise a certain amount of revenue requires to tax capital income at least as much as labor income, and possibly more.

Keywords: endogenous growth; optimal taxation; informal sector; developing economies. (search for similar items in EconPapers)
JEL-codes: E62 O17 O23 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2003-05
New Economics Papers: this item is included in nep-dev, nep-mac, nep-pub and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.idep-fr.org/IMG/document/dt/dt0307.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: Second-best optimal taxation of capital and labor in a developing economy (2005)
Working Paper: Second-Best Optimal Taxation of Capital and Labor in a Developing Economy (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iep:wpidep:0307

Access Statistics for this paper

More papers in IDEP Working Papers from Institut d'economie publique (IDEP), Marseille, France Contact information at EDIRC.
Bibliographic data for series maintained by Gregory Cornu ().