Optimal Positive Capital Taxes at Interior Steady States

Jess Benhabib and Bálint Szőke

No 25895, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We generalize recent results of Bassetto and Benhabib (2006) and Straub and Werning (2018) in a neo-classical model with endogenous labor-leisure choice where all agents are allowed to save and accumulate capital. We provide a sufficient condition under which optimal redistributive capital taxes remain at their allowed upper bound forever, even if the resulting equilibrium trajectory converges to a unique steady state with positive and finite consumption, capital, and labor. We then provide an interpretation of our sufficient condition. Using recent evidence on wealth distribution in the United States, we argue that our sufficient condition is empirically plausible.

JEL-codes: E62 H21 H23 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-dge, nep-gro, nep-mac, nep-ore, nep-pbe and nep-pub
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Citations: View citations in EconPapers (14)

Published as Jess Benhabib & Bálint Szőke, 2021. "Optimal Positive Capital Taxes at Interior Steady States," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(1), pages 114-150, January.

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