nep-pub New Economics Papers
on Public Finance
Issue of 2013‒09‒06
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Optimal capital taxation for time-nonseparable preferences By Moritz Kuhn; Sebastian Koehne
  2. Anticipation, Learning and Welfare: the Case of Distortionary Taxation By Emanuel Gasteiger; Shoujian Zhang
  3. A Note on Commodity Taxation and Economic Growth By Kunihiko Konishi

  1. By: Moritz Kuhn (University of Bonn); Sebastian Koehne (Stockholm University)
    Abstract: We study optimal capital taxation in a dynamic Mirrleesian model with time-nonseparable preferences. The model covers the widely used cases of habit formation and durable consumption. Time-nonseparable preferences change labor supply incentives across time and thereby generate novel motives to distort capital accumulation decisions. We decompose intertemporal wedges (implicit capital taxes) into three components and provide conditions under which intertemporal wedges are positive. We derive a recursive formulation of constrained efficient allocations and evaluate the quantitative importance of habit formation for intertemporal wedges. In our baseline parameterization, habit formation reduces average intertemporal wedges by about 40 percent compared to the time-separable case.
    Date: 2013
  2. By: Emanuel Gasteiger (Instituto Universitario de Lisboa); Shoujian Zhang (University of St Andrews)
    Abstract: We study the impact of anticipated fiscal policy changes in a Ramsey economy where agents form long-horizon expectations using adaptive learning. We ex- tend the existing framework by introducing distortionary taxes as well as elastic labour supply, which makes agents' decisions non-predetermined but more realistic. We detect that the dynamic responses to anticipated tax changes under learning have oscillatory behaviour that can be interpreted as self-fullling waves of optimism and pessimism emerging from systematic forecast errors. Moreover, we demonstrate that these waves can have important implications for the welfare consequences of fiscal reforms.
    Keywords: Fiscal Policy, Adaptive Learning, Oscillations
    JEL: E32 E62 D84
    Date: 2013–08–26
  3. By: Kunihiko Konishi (Graduate School of Economics, Osaka University)
    Abstract: This note reexamines the growth effects of commodity taxation and a manufacturing subsidy. By incorporating endogenous labor supply into a variety expansion model following Grossman and Helpman (1991), we derive new results. First, if households consider leisure to be important, an increase in the commodity tax rate can decrease the growth rate in the short run. Second, a small elasticity of substitution and a small manufacturing subsidy halt economic growth. Third, when the elasticity of substitution is small and sustained growth is possible, a decrease in the subsidy raises the short-run growth rate and decreases the long-run growth rate.
    Keywords: Commodity taxation, Subsidy, Labor supply, Endogenous growth
    JEL: E62 O41
    Date: 2013–09

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