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on Public Finance |
| By: | Matteo Ghilardi; Roy Zilberman |
| Abstract: | We examine the macroeconomic, asset pricing, and public debt consequences of deficit financing dividend taxation in a dynamic general equilibrium model featuring partial investment irreversibility. Dividend taxes interact directly with the occasionally-binding irreversibility constraint, generating tax-augmented user-cost and hangover channels that both shape investment and debt-to-output fluctuations and account for a sizeable share of their long-run volatilities. Our analysis further reveals that debt-offsetting dividend tax hikes initially trigger investment inactivity through higher user-costs, followed by a surge driven by intertemporal tax arbitrage and hangover effects. Finally, debt-driven dividend tax rules amplify asset price fluctuations while delivering only modest fiscal revenue changes. |
| Keywords: | Dividend Taxation; Investment Frictions; Asset Prices; Deficit Financing; Public Debt. |
| Date: | 2025–05–02 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/083 |
| By: | Pawel‚ Doligalski (Group for Research in Applied Economics (GRAPE); Bristol University); Piotr Dworczak (Northwestern University; Group for Research in Applied Economics (GRAPE)); Mohammad Akbarpour (Stanford University); Scott Duke Kominers (Harvard Business School Harvard University; Harvard Business Becker Friedman Institute for Research in Economics University of Chicago; Department of Economics Harvard University) |
| Abstract: | Policymakers often intervene in goods markets to effect redistribution---for example, via price controls, differential taxation, or in-kind transfers. We investigate the optimality of such policies alongside the (optimally-designed) income tax. In our framework, agents possess private information about their ability to generate income and consumption preferences, and a planner maximizes a social welfare function subject to resource constraints. We uncover a generalization of the Atkinson-Stiglitz theorem by showing that goods markets should be undistorted if (i) individual utility functions feature no income effects, (ii) redistributive preferences depend only on agents’ ability, and (iii) there is no statistical correlation between ability and taste for goods. We also show, however, that the conclusion of the Atkinson-Stiglitz theorem fails if any of the three assumptions is relaxed. In a special case of our model with linear utilities, binary ability, and continuous willingness to pay for a single good, we characterize the globally optimal mechanism and show that it may feature means-tested consumption subsidies, in-kind transfers, and differential commodity taxation. |
| Keywords: | membership, allocative externalities, pricing tiers, rationing |
| JEL: | D47 D82 H21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:fme:wpaper:103 |
| By: | Eren Gürer; Alfons Weichenrieder |
| Abstract: | This study examines optimal government redistribution in a Mirrleesian framework, accounting for a negative effect of longer working hours on productivity. A government ignoring this effect perceives labor supply as insufficient and sets lower marginal income taxes to encourage work. In contrast, a government recognizing the endogenous relationship between productivity and labor supply redistributes more. However, the resulting marginal taxes are still lower than those predicted by standard models where productivity is independent of working hours. |
| Keywords: | working hours, productivity, optimal redistribution, self-confirming policy equilibrium. |
| JEL: | H21 H31 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11866 |
| By: | Andrea Vaccaro |
| Abstract: | This paper investigates the relationship between inequality and redistributive taxation. It provides a review of existing research on the topic and a cross-country empirical analysis of this relationship. Using data from the World Income Inequality Database, Government Revenue Dataset, and other publicly available sources, it evaluates the validity of a classic political economy argument according to which higher income inequality leads to more redistributive government policies. |
| Keywords: | Redistribution, Income inequality, Ethnic inequality, Taxation, Democracy, Global south |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-31 |
| By: | Johannes Gallé; Rodrigo Oliveira; Daniel Overbeck; Nadine Riedel; Edson Severnini |
| Abstract: | This paper provides the first comprehensive analysis of how firms in emerging economies respond to carbon taxation, leveraging detailed administrative data from South Africa—a potential trailblazer for other developing countries with limited state capacity amid the growing global push for carbon pricing. We examine the dynamic impacts of the carbon tax on firm-level outcomes—such as profits, sales, capital, and labour inputs—across manufacturing and mining firms, which are key sectors in the context of the carbon tax. |
| Keywords: | Carbon pricing, Carbon tax, Firm performance, Employment |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-33 |