Macroeconomics with endogenous markups and optimal taxation

Federico Etro ()

No 2016:32, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: The neoclassical macroeconomic framework is extended to general preferences over a variety of goods supplied under monopolistic, Bertrand or Cournot competition to derive implications for business cycle, market inefficiencies and optimal corrective taxation. When markups are endogenously countercyclical the impact of shocks on consumption and labor supply is magnified through new intertemporal substitution mechanisms, and the optimal fiscal policy requires a countercyclical labor income subsidy and a capital income tax that is positive along the growth path and converging to zero in the long run. With an endogenous number of goods and strategic interactions, entry affects markups and the optimal fiscal policy requires also a tax on profits. We characterize the equilibrium dynamics and derive explicit tax rules for a variety of intratemporal preference aggregators including the quadratic, directly additive, indirectly additive and homothetic classes.

Keywords: Monopolistic competition; variable markups; optimal taxation; business cycles (search for similar items in EconPapers)
JEL-codes: E1 E2 E3 (search for similar items in EconPapers)
Pages: 41
Date: 2016
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-mac and nep-pbe
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.unive.it/web/fileadmin/user_upload/dip ... P_DSE_etro_32_16.pdf First version, anno (application/pdf)

Related works:
Journal Article: Macroeconomics with Endogenous Markups and Optimal Taxation (2018)
Working Paper: Macroeconomics with Endogenous Markups and Optimal Taxation (2018)
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:ven:wpaper:2016:32

Access Statistics for this paper

More papers in Working Papers from Department of Economics, University of Venice "Ca' Foscari" Contact information at EDIRC.
Bibliographic data for series maintained by Sassano Sonia ().