The Sufficient Statistic Approach: Predicting the Top of the Laffer Curve

Alejandro Badel () and Mark Huggett

No 2015-38, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We provide a formula for the tax rate at the top of the Laffer curve as a function of three elasticities. Our formula applies to static models and to steady states of dynamic models. One of the elasticities that enters our formula has been estimated in the elasticity of taxable income literature. We apply standard empirical methods from this literature to data produced by reforming the tax system in a model economy. We find that these standard methods underestimate the relevant elasticity in models with endogenous human capital accumulation.

Keywords: sufficient statistics; Laffer Curve; marginal tax rates; Elasticity (search for similar items in EconPapers)
JEL-codes: D91 E21 H2 J24 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2015-11-10
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pbe
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: The sufficient statistic approach: Predicting the top of the Laffer curve (2017)
Working Paper: The Sufficient Statistic Approach: Predicting the Top of the Laffer Curve (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2015-038

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DOI: 10.20955/wp.2015.038

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