An Analysis the Effect of Capital Taxation on Allocation of Resources: A Dynamic Equilibrium Model Approach

Hojjat Izadkhasti () and Abbas Arabmazar ()
Additional contact information
Hojjat Izadkhasti: Faculty of Economics and Political Sciences, Shahid Beheshti University, Tehran, Iran.
Abbas Arabmazar: Faculty of Economics and Political Sciences, Shahid Beheshti University, Tehran, Iran.

Iranian Economic Review (IER), 2016, vol. 20, issue 2, 175-186

Abstract: The return of capital is fundamental to the intertemporal allocation of resources by changing the consumption behavior and capital accumulation over time. Taxation on return of capital increases the marginal product of capital, meaning that capital stock is lower than when capital is not taxed, which results decreased growth and welfare in steady state. This paper studies the impact of capital income taxation on capital stock, output and welfare in a dynamic optimization model. Theoretical and experimental results indicate that any attempt to decrease taxation on return of capital in Iran's economy, will be eventually reached to a higher capital formation, higher output and consumption per capita in the steady state. Finally, leads to higher welfare level in the steady state.

Keywords: Optimal Control Theory; Optimal Capital Taxation; Distortionary Taxation. (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
ftp://80.66.179.253/eut/journl/20162-4.pdf (application/pdf)

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:eut:journl:v:20:y:2016:i:2:p:175

Access Statistics for this article

Iranian Economic Review (IER) is currently edited by Dr.Hossien Abbasinejad

More articles in Iranian Economic Review (IER) from Faculty of Economics,University of Tehran.Tehran,Iran Contact information at EDIRC.
Bibliographic data for series maintained by [z.rahimalipour] ().