Capital taxation, long-run growth, and bequests

Lars Kunze

Journal of Macroeconomics, 2010, vol. 32, issue 4, 1067-1082

Abstract: It has been shown that higher capital taxes can have a growth-enhancing effect when combined with a revenue-compensating cut in wage taxes or with an expansion in productivity-increasing public services. The present paper demonstrates that these results critically hinge on the existence of a bequest motive. It is shown that a wage-tax cut is no longer growth-enhancing when bequests are operative. By way of contrast, increasing productive public services may well boost growth. The theoretical findings are illustrated by numerical simulations based on US data.

Keywords: Capital; income; taxation; Public; spending; Overlapping; generations; Growth; Family; altruism (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:32:y:2010:i:4:p:1067-1082

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