On the role of progressive taxation in a Ramsey Model with heterogeneous households

Stefano Bosi () and Thomas Seegmuller
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Stefano Bosi: EQUIPPE - Université de Lille 1 et EPEE - Université d'Evry

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: The aim of this paper is to study the role of progressive tax rules on the allocations of steady state and the stability properties in a Ramsey economy with heterogeneous households and borrowing constraints. Since labor supply in elastic, considering different tax rates on capital and labor incomes is relevant. The steady state analysis allows us to highlight the existence of different types of stationary equilibria. While patient agents always hold capital, impatient ones have or not positive savings, depending on the leval of real interest rate. Furthermore, it is not always optimal for all households to have a positive labor supply. Studying the comparative statics and local dynamics, we focus on the steady state with a segmented population: patient households own the whole stock of capital, while the impatient ones are workers. Varying the population sizes and the tax rates, we underline the crucial role of fiscal progressivity and endogenous labor. Moreover, in contrast to many contributions, we prove that progressive tax rules can promote expectation-driven fluctuations and endogenous cycles which means that progressivity can be inopportune to stabilize macroeconomic volatility

Keywords: Progressive taxation; heterogeneous agents; borrowing constraint; endogenous labor supply; steady state allocation; macroeconomic stability (search for similar items in EconPapers)
JEL-codes: C62 E32 H20 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2008-06
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pub
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Citations: View citations in EconPapers (4)

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ftp://mse.univ-paris1.fr/pub/mse/CES2008/V08051.pdf (application/pdf)

Related works:
Journal Article: On the role of progressive taxation in a Ramsey model with heterogeneous households (2010)
Working Paper: On the Role of Progressive Taxation in a Ramsey Model with Heterogeneous Households (2008)
Working Paper: On the Role of Progressive Taxation in a Ramsey Model with Heterogeneous Households (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:v08051

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