Supply side interventions and redistribution

Teresa Garcia-Mila, Albert Marcet and Eva Ventura

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: In this paper we study the welfare impact of alternative tax schemes on labor and capital. We evaluate the e_ect of lowering capital income taxes on the distribution of wealth in a model with heterogeneous agents, restricting our attention to policies with constant tax rates. We calibrate and simulate the economy; we find that lowering capital taxes has two effects: i) it increases effciency in terms of aggregate production, and ii) it redistributes wealth in favor of those agents with a low wage/wealth ratio. We find that the redistributive effect dominates, and that agents with a low wage wealth ratio would experience a large loss in utility if capital income taxes were eliminated.

Keywords: Taxation; Heterogeneity; Redistribution; Simulation (search for similar items in EconPapers)
JEL-codes: E37 E61 E62 E63 H23 (search for similar items in EconPapers)
Date: 1995-06
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (39)

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Related works:
Journal Article: Supply Side Interventions and Redistribution (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:115

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