Economics at your fingertips  

Capital Taxation: Quantitative Explorations of the Inverse Euler Equation

Emmanuel Farhi and Iván Werning ()

Journal of Political Economy, 2012, vol. 120, issue 3, 000 - 000

Abstract: Economies with private information provide a rationale for capital taxation. In this paper we ask what the welfare gains from following this prescription are. We develop a method to answer this question in standard general equilibrium models with idiosyncratic uncertainty and incomplete markets. We find that general equilibrium forces are important and greatly reduce the welfare gains. Once these effects are taken into account, the gains are relatively small in our benchmark calibration. These results do not imply that dynamic aspects of social insurance design are unimportant, but they do suggest that capital taxation may play a modest role.

Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37) Track citations by RSS feed

Downloads: (external link) (application/pdf) (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Capital Taxation: Quantitative Explorations of the Inverse Euler Equation (2009) Downloads
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:

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

Page updated 2022-11-27
Handle: RePEc:ucp:jpolec:doi:10.1086/666747