The Laffer curve revisited

Mathias Trabandt and Harald Uhlig ()

Journal of Monetary Economics, 2011, vol. 58, issue 4, 305-327

Abstract: Laffer curves for the US, the EU-14 and individual European countries are compared, using a neoclassical growth model featuring “constant Frisch elasticity” (CFE) preferences. New tax rate data is provided. The US can maximally increase tax revenues by 30% with labor taxes and 6% with capital taxes. We obtain 8% and 1% for the EU-14. There, 54% of a labor tax cut and 79% of a capital tax cut are self-financing. The consumption tax Laffer curve does not peak. Endogenous growth and human capital accumulation affect the results quantitatively. Household heterogeneity may not be important, while transition matters greatly.

Date: 2011
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Citations: View citations in EconPapers (360)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:58:y:2011:i:4:p:305-327

DOI: 10.1016/j.jmoneco.2011.07.003

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