Optimal asymmetric sector-specific labour taxation in an overlapping generations model
Journal of Economics, 2019, vol. 127, issue 1, No 1, 18 pages
Abstract This paper presents a simple rule for optimal asymmetric labour taxation and subsidization in a two-sector model with logarithmic utilities and Cobb–Douglas production functions, linked to demographic factors: fertility rate and longevity. The paper shows that depending on whether the economy is dynamically efficient or inefficient, it may be optimal to tax or subsidize labour in the sectors. Under dynamic inefficiency, it is optimal to tax the investment-goods sector and a Pareto-improving tax reform is possible. Larger output elasticities of capital in the sectors reduce the possibilities of a Pareto-improving reform, while population ageing in terms of higher longevity enhances the possibilities of welfare improvement for all generations. Fertility rates do not affect optimal taxation. In appendix, we also address the cases of capital taxation/subsidisation and value-added taxes.
Keywords: Two sectors; Factor mobility; Asymmetric taxation; Optimality; Population ageing (search for similar items in EconPapers)
JEL-codes: E62 H21 J10 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s00712-018-0625-1 Abstract (text/html)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:127:y:2019:i:1:d:10.1007_s00712-018-0625-1
Access Statistics for this article
Journal of Economics is currently edited by Giacomo Corneo
More articles in Journal of Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().