Are Progressive Income Taxes Stabilizing?

Nicolas Dromel and Patrick Pintus

Post-Print from HAL

Abstract: We assess the stabilizing effect of progressive income taxes in a monetary economy with constant returns to scale. It is shown that tax progressivity reduces, in parameter space, the likelihood of local indeterminacy, sunspots and cycles. However, considering plausibly low levels of tax progressivity does not ensure saddle- point stability and preserves as robust the occurrence of sunspot equilibria and endogenous cycles. It turns out that increasing progressivity, through its impact on after-tax income, makes labor supply more inelastic. However, even when large, tax progressivity does not neutralize the effects of expected inflation on current labor supply which may lead to expectation-driven business fluctuations.

Keywords: Stabilization; Progressive Income Taxes; Business Cycles; Sunspots; Stabilization. (search for similar items in EconPapers)
Date: 2008-06
References: Add references at CitEc
Citations: View citations in EconPapers (31)

Published in Journal of Public Economic Theory, 2008, 10 (3), pp.329-349. ⟨10.1111/j.1467-9779.2008.00365.x⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Are Progressive Income Taxes Stabilizing? (2008)
Working Paper: Are Progressive Income Taxes Stabilizing? (2008)
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:hal:journl:halshs-00640857

DOI: 10.1111/j.1467-9779.2008.00365.x

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().