Self-control Preferences and Taxation: A Quantitative Analysis in a Life Cycle Model
Cagri Kumru () and
Athanasios C. Thanopoulos
ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics
This paper examines the impact of various .fiscal policies, namely, taxes on consumption, lab and capital when agents have self-control preferences. Agents trade in a stochastic overlapping generations economy while facing borrowing constraints. We quantitatively show that modelling choices, such as, liquidity constraints, life-cycle structure and idiosyncratic earnings risks, that were previously considered to be critical in delivering a positive capital income tax, need not be binding in this regard. We argue and quantitatively show that for a sufficiently large measure of individuals having self-control preferences instead of CRRA preferences, or alternatively, for a sufficiently high cost of exercising self control when all individuals are self-control types, the optimal capital income tax is zero. Given there is strong empirical and experimental evidence regarding the existence of self-control problems, our model provides quite an interesting insight: as agents.self-control costs rise, the optimal capital income tax rate will converge to Chamley and Judd value.
JEL-codes: E21 E62 H55 (search for similar items in EconPapers)
Pages: 28 Pages
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Working Paper: Self-control Preferences and Taxation: A Quantitative Analysis in a Life-cycle Model (2011)
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:acb:cbeeco:2011-546
Access Statistics for this paper
More papers in ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by ().