Redistribution and fiscal policy

Juan F Rubio-Ramirez

No 2002-32, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: This paper studies the optimal behavior of a democratic government in its use of fiscal policies to redistribute income. I present a stochastic dynamic general equilibrium model with heterogeneous agents to analyze (1) the differences between the effects on the optimal tax rate of permanent and nonpermanent perturbations and (2) the relationship between initial inequality and both steady-state levy and income distribution. In addition, the optimal fiscal policy for the transition is calculated. The analysis leads me to three main conclusions. First, there are no important differences between how taxes respond to a permanent or nonpermanent perturbation. Second, the initial inequality has a huge effect on both actual levy and actual income distribution. And finally, the Chari, Christiano, and Kehoe (1992) result, i.e., taxes on labor are roughly constant over the business cycle, holds only if the productivity ratio is constant. In addition, the model implies a positive correlation between inequality and tax rate, just as in the basic literature.

Keywords: Taxation; Income distribution (search for similar items in EconPapers)
Date: 2002
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.atlantafed.org/-/media/documents/resea ... /wp/2002/wp0232a.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:fip:fedawp:2002-32

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta Contact information at EDIRC.
Bibliographic data for series maintained by Rob Sarwark ().