Capital Taxation in a Simple Finite-Horizon OLG Model

Charles Blackorby and Craig Brett

No 269603, Economic Research Papers from University of Warwick - Department of Economics

Abstract: In a simple finite-horizon overlapping-generations model where the government has the power to levy commodity taxes and to implement uniform lump-sum transfers, and individuals as well as the government can purchase units of a storable good in order to transfer resources from the present to the future, we derive the equations that implicitly define the taxes and subsidies that are part of the second-best Pareto optima. In this context we first show that there is production efficiency. We then show that taxes on capital income/savings are required at almost all Pareto optima. Finally we show that there are no restriction on preferences or technologies that are consistent with a general exemption of capital income/savings from the tax base.

Keywords: Agricultural and Food Policy; Financial Economics (search for similar items in EconPapers)
Pages: 25
Date: 2004-04-04
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:269603

DOI: 10.22004/ag.econ.269603

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