Tax smoothing in a business cycle model with capital-skill complementarity

Stylianos Asimakopoulos, Jim Malley and Konstantinos Angelopoulos

No 2014/11, Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: This paper undertakes a normative investigation of the quantitative properties of optimal tax smoothing in a business cycle model with state contingent debt, capital-skill complementarity and endogenous skill acquisition under technology and public expenditure shocks. We find that skilled and unskilled labour tax smoothing maintain quantitatively under externalities and exogenous shocks in skill acquisition, as well as when the relative skill supply is exogenously determined. We further find that the government finds it optimal to reduce both the size of the wedge between the marginal rates of substitution and transformation in skill attainment in the long-run and the standard deviation of this wedge over the business cycle. This is achieved by subsidising skill creation and taxing both types of labour income.

Keywords: skill premium; tax smoothing; optimal fiscal policy (search for similar items in EconPapers)
Date: 2014-11
New Economics Papers: this item is included in nep-dge, nep-mac, nep-pbe and nep-pub
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.nottingham.ac.uk/cfcm/documents/papers/cfcm-2014-11.pdf (application/pdf)

Related works:
Journal Article: Tax smoothing in a business cycle model with capital-skill complementarity (2015)
Working Paper: Tax Smoothing in a Business Cycle Model with Capital-Skill Complementarity (2014)
Working Paper: Tax smoothing in a business cycle model with capital-skill complementarity (2014)
Working Paper: Tax smoothing in a business cycle model with capital-skill complementarity (2014)
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:not:notcfc:14/11

Access Statistics for this paper

More papers in Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM) School of Economics University of Nottingham University Park Nottingham NG7 2RD. Contact information at EDIRC.
Bibliographic data for series maintained by Hilary Hughes ().