A NOTE ON PROGRESSIVE TAXATION, NOMINAL-WAGE RIGIDITY, AND BUSINESS CYCLE DESTABILIZATION
| Autor: | Miroslav Gabrovski, Jang-Ting Guo |
|---|---|
| Rok vydání: | 2019 |
| Předmět: |
Economics and Econometrics
050208 finance media_common.quotation_subject Keynesian economics 05 social sciences Automatic stabilizer Wage Rigidity (psychology) Context (language use) Degree (music) Shock (economics) 0502 economics and business Business cycle New Keynesian economics Economics 050207 economics media_common |
| Zdroj: | Macroeconomic Dynamics. 25:1112-1125 |
| ISSN: | 1469-8056 1365-1005 |
| DOI: | 10.1017/s1365100519000579 |
| Popis: | In the context of a prototypical New Keynesian model, this paper examines the theoretical interrelations between two tractable formulations of progressive taxation on labor income versus (i) the equilibrium degree of nominal-wage rigidity as well as (ii) the resulting volatilities of hours worked and output in response to a monetary shock. In sharp contrast to the traditional stabilization view, we analytically show that linearly progressive taxation always operates like an automatic destabilizer which leads to higher cyclical fluctuations within the macroeconomy. We also obtain the same business cycle destabilization result under continuously progressive taxation if the initial degree of tax progressivity is sufficiently low. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
|