Public Investment when Capital is Back - Distributional Effects of Heterogeneous Saving Behavior

Linus Mattauch, Ottmar Edenhofer, David Klenert and Sophie Bénard

No 4714, CESifo Working Paper Series from CESifo

Abstract: We study the impact of heterogeneous saving behavior on the distributional effects of public investment. A capital tax is levied to finance productive public capital in an economy with two types of households: high income households who save dynastically and middle income households who save for retirement. We find that inequality is reduced the higher the capital tax rate and that low rates even constitute a Pareto-improvement. There is thus no clear-cut trade-off between efficiency and inequality: middle income households’ consumption is maximal at a higher capital tax rate than high income households’ consumption.

Keywords: public capital; wealth disparity; inequality; household heterogeneity; Pasinetti Paradox; saving behavior (search for similar items in EconPapers)
JEL-codes: E60 H23 H31 H40 H54 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp4714.pdf (application/pdf)

Related works:
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: https://EconPapers.repec.org/RePEc:ces:ceswps:_4714

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().