Aggregate Instability under Labor Income Taxation and Balanced-Budget Rules: Preferences Matter
| Autor: | Nicolas Abad, Thomas Seegmuller, Alain Venditti |
|---|---|
| Přispěvatelé: | Groupement de Recherche en Économie Quantitative d'Aix-Marseille (GREQAM), École Centrale de Marseille (ECM)-École des hautes études en sciences sociales (EHESS)-Centre National de la Recherche Scientifique (CNRS)-Aix Marseille Université (AMU), EDHEC Business School, Département Comptabilité, Droit, Finance et Economie, Lai Tong, Charles, École des hautes études en sciences sociales (EHESS)-Aix Marseille Université (AMU)-École Centrale de Marseille (ECM)-Centre National de la Recherche Scientifique (CNRS) |
| Jazyk: | angličtina |
| Rok vydání: | 2013 |
| Předmět: |
Indeterminacy
expectation-driven business cycles labor income taxes balance-budget rule infinite-horizon model balanced-budget rule jel:E62 indeterminacy expectation-driven business cycles labor income taxes balanced-budget rule infinite-horizon model jel:C62 jel:E32 expectation-driven business cycles [SHS.ECO] Humanities and Social Sciences/Economics and Finance labor income taxes indeterminacy [SHS.ECO]Humanities and Social Sciences/Economics and Finance infinite-horizon model |
| Popis: | We investigate the role of preferences in the existence of expectation-driven instability under a balanced budget rule where government spendings are financed by a tax on labor income. Considering a one-sector neoclassical growth model with a large class of preferences, we find that expectation-driven fluctuations are more likely when consumption and labor are Edgeworth substitutes. Under this property, an intermediate range of tax rates and a sufficiently low elasticity of intertemporal substitution in consumption lead to instability. Numerical simulations of the model support the conclusion that labor income taxation is a plausible source of instability in most OECD countries. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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