Progressive Taxation, Wealth Distribution, and Macroeconomic Stability

Kazuo Mino and Yasuhiro Nakamoto ()

No 08-22, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: Using the standard neoclassical growth model with two types of agents, we examine how the presence of heterogenous agents affects the stabilization role of progressive income taxation. We first show that if the marginal tax payment of each agent increases with her relative income, the steady state satisfies local saddlepoint stability so that the equilibrium is determinate. However, unlike the representative agent models with progressive taxation, our model with heterogeneous agents may have the possibility of equilibrium indeterminacy. The indeterminacy conditions depend not only on the property of tax functions but also on production and preference structures.

Keywords: heterogeneous agents; progressive taxation; wealth distribution; aggregate stability (search for similar items in EconPapers)
JEL-codes: E52 O42 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2008-05
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:0822

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