INFRASTRUCTURE AND INEQUALITY: INSIGHTS FROM INCORPORATING KEY ECONOMIC FACTS ABOUT HOUSEHOLD HETEROGENEITY
David Klenert,
Linus Mattauch,
Ottmar Edenhofer and
Kai Lessmann
Macroeconomic Dynamics, 2018, vol. 22, issue 4, 864-895
Abstract:
We study the impacts of investment in public capital on equity and efficiency. Taking into account stylized facts on wealth accumulation, we model agent heterogeneity through differences in saving behavior, income source and time preference. We find that in the long run, public investment is Pareto-improving and that it reduces inequality in wealth, welfare, and income at the same time, if it is financed by a capital tax. Consumption tax financing is also Pareto-improving but distribution-neutral. Only for labor tax financing, a trade-off between equity and efficiency occurs. Additionally, we find that agents differ in their preferred tax rates.The results for capital and labor tax financing are valid for both, the case of decreasing and constant returns to accumulable factors.
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)
Related works:
Working Paper: Infrastructure and Inequality: Insights from Incorporating Key Economic Facts about Household Heterogeneity (2014) 
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:cup:macdyn:v:22:y:2018:i:04:p:864-895_00
Access Statistics for this article
More articles in Macroeconomic Dynamics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().