Optimal Taxation with Consumption Time as a Leisure or Labor Substitute

Robin Boadway and Firouz Gahvari

No 273544, Queen's Economics Department Working Papers from Queen's University - Department of Economics

Abstract: This paper studies the optimal commodity taxation problem when time taken in consumption is a perfect substitute for either labor or leisure. It shows that while labor substitutability affects the optimal tax structure, leisure substitutability leaves the classical optimal tax results intact. In the Ramsey tax framework with linear income taxes, whether the consumers have the same or different earning abilities, labor substitutes tend to be taxed at a higher rate than leisure substitutes with the tax differential being increasing in consumption time. This is not necessarily the case when one allows for nonlinear income taxation.

Keywords: Demand and Price Analysis; Financial Economics (search for similar items in EconPapers)
Pages: 42
Date: 2006-01
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Journal Article: Optimal taxation with consumption time as a leisure or labor substitute (2006)
Working Paper: Optimal Taxation With Consumption Time As A Leisure Or Labor Substitute (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:quedwp:273544

DOI: 10.22004/ag.econ.273544

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