Endogenous Taxation: An Overlapping Generations Approach

Thomas I Renstrom

Economic Journal, 1996, vol. 106, issue 435, 471-82

Abstract: This paper develops an overlapping generations framework of endogenous taxation. There are three types of heterogeneity among individuals: age, productivity, and bequest motives. The heterogeneity gives rise to a redistributive conflict and, therefore, to different preferences over fiscal policy. Linear taxes are levied on consumption expenditure, wage income, and capital income. These tax rates and the provision of a public good become endogenous through a majority-voting rule. The dynamic politico-economic equilibrium is examined both in and outside the steady state. The focus is on the underlying characteristics of the economy that gives rise to a particular fiscal structure. Copyright 1996 by Royal Economic Society.

Date: 1996
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