 Optimal asymmetric sector-specific labour taxation in an overlapping generations modelJournal of Economics, 2019, vol. 127, issue 1, No 1, 18 pages Abstract: 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) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:127:y:2019:i:1:d:10.1007_s00712-018-0625-1 DOI: 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 |
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