Factor income taxation in a horizontal innovation model

Xin Long and Alessandra Pelloni

Journal of Public Economics, 2017, vol. 154, issue C, 137-159

Abstract: We consider the optimal factor income taxation in a standard R&D model with technical change represented by an increase in the variety of intermediate goods. In the model there are externalities both to working and to saving, due to market power by firms, incomplete appropriability of the benefits of inventions and the cost of economic activity in terms of public expenditures. Redistributing the tax burden from labor to capital will increase employment but, in most cases, reduce the rate of growth, with conflicting effects on the deadweight loss from the externalities. Under plausible calibrations of the model, the optimal tax rate on capital will be sizable.

Keywords: Capital income taxes; R&D; Growth effect; Welfare effect (search for similar items in EconPapers)
JEL-codes: E62 H21 O41 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272717301007
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Factor Income Taxation in a Horizontal Innovation Model (2013)
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:eee:pubeco:v:154:y:2017:i:c:p:137-159

DOI: 10.1016/j.jpubeco.2017.06.008

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().