Intergenerational Allocation of Government Expenditures: Externalities and Optimal Taxation

Kazi Iqbal () and Stephen J Turnovsky

Journal of Public Economic Theory, 2008, vol. 10, issue 1, 27-53

Abstract: This paper studies optimal capital and labor income taxes when the benefits of public goods are age‐dependent. Provided the government can impose a consumption tax, it can attain the first‐best resource allocation. This involves the uniform taxation of the cohorts' labor income and a zero capital income tax. With no consumption tax and optimally chosen government spending, labor income should be taxed nonuniformly across cohorts and the capital income tax should be nonzero. Deviations of the public goods from their respective optima create distortions. These affect the labor supply decisions of both cohorts and capital accumulation, providing a further reason to tax (or subsidize) capital income.

Date: 2008
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://doi.org/10.1111/j.1467-9779.2008.00350.x

Related works:
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:bla:jpbect:v:10:y:2008:i:1:p:27-53

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1097-3923

Access Statistics for this article

Journal of Public Economic Theory is currently edited by Rabah Amir, Gareth Myles and Myrna Wooders

More articles in Journal of Public Economic Theory from Association for Public Economic Theory Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().