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The Stationary Distribution of Wealth under Progressive Taxation

Daniel Carroll and Eric Young ()

Review of Economic Dynamics, 2009, vol. 12, issue 3, 469-478

Abstract: This paper considers the long-run distribution of capital holdings in a model with complete asset markets and progressive taxation. Households are assumed to be heterogeneous in their labor market productivity. We show that this model is capable of producing a nondegenerate determinate wealth distribution. However, it also predicts that capital and labor income will be negatively correlated. These results are robust to the introduction of elastic labor supply and borrowing constraints. (Copyright: Elsevier)

Keywords: Heterogeneity; Progressive taxation; Wealth distribution (search for similar items in EconPapers)
JEL-codes: E21 E25 E62 (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1016/j.red.2008.09.002

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