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Taxation and Income Distribution Dynamics in a Neoclassical Growth Model

Cecilia García‐peñalosa and Stephen J Turnovsky ()
Authors registered in the RePEc Author Service: Cecilia Garcia-Penalosa ()

Journal of Money, Credit and Banking, 2011, vol. 43, issue 8, 1543-1577

Abstract: We examine how changes in tax policies affect the dynamics of the distributions of wealth and income in a Ramsey model in which agents differ in their initial capital endowments. The endogeneity of the labor supply plays a crucial role, as tax changes that affect hours of work will affect the distribution of wealth and income, reinforcing or offsetting the direct redistributive impact of taxes. We consider different ways of financing government expenditure and find that policies that reduce the labor supply are associated with lower output but also with a more equal distribution of after‐tax income. We illustrate these effects by examining the impact of recent tax changes observed in the United States and in European economies.

Date: 2011
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https://doi.org/10.1111/j.1538-4616.2011.00458.x

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Journal Article: Taxation and Income Distribution Dynamics in a Neoclassical Growth Model (2011) Downloads
Working Paper: Taxation and Income Distribution Dynamics in a Neoclassical Growth Model (2008) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:43:y:2011:i:8:p:1543-1577

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