Linearly Progressive Income Taxes and Stabilization

Nicolas Dromel and Patrick Pintus

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Abstract: It has been shown that progressive income taxes may lead to saddle-point convergence when the marginal tax rate is assumed to be a continuously increasing function of income. This note shows that linearly progressive taxes may also immunize the economy against indeterminacy and sunspot equilibria. Therefore, our analysis suggests that exemption thresholds, as featured by prevailing tax codes, may help to stabilize the economy.

Keywords: Business cycles; Progressive income taxes; Sunspots (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (14)

Published in Research in Economics, 2007, 61 (1), pp.25-29. ⟨10.1016/j.rie.2006.12.002⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00641124

DOI: 10.1016/j.rie.2006.12.002

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