Pareto-improving optimal capital and labor taxes

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• dc.contributor.author Greulich, Katharina
• dc.contributor.author Laczó, Sarolta
• dc.contributor.author Marcet, Albert
• dc.date.accessioned 2024-03-13T08:00:14Z
• dc.date.issued 2023
• dc.description Supplementary materials files: online appendix; replication data.
• dc.description.abstract We study optimal Pareto-improving factor taxation when agents are heterogeneous in their labor productivity and wealth and markets are complete. Pareto-improving policies require a gradual reform: labor taxes should be cut, and capital taxes should remain high for along time before reaching the limit. This policy redistributes wealth in favor of workers, promotes growth, and causes early deficits and government debt in the long run. We address several technical issues, such as sufficiency of Lagrangian solutions in a Ramsey problem, their relation to welfare functions, and solution algorithms. We also provide a proof that long-run capital taxes are zero.
• dc.description.sponsorship Marcet acknowledges funding from the Axa Foundation, the Excellence Program of Banco de España, the European Research Council under grants FP/2007–2013 no. 324048 (Asset Prices and Macro Policy When Agents Learn [APMPAL]) and Horizon 2020 grant agreement no. 788547 (APMPAL-HET), Agencia de Gestio d’Ajuts Universitaris i de Recerca (Generalitat de Catalunya), and the Spanish Ministry of Economy and Competitiveness through the Severo Ochoa Program for Centers of Excellence in R&D (CEX2019-000915-S).
• dc.format.mimetype application/pdf
• dc.identifier.citation Greulich K, Laczó S, Marcet A. Pareto-improving optimal capital and labor taxes. Journal of political economy. 2023 Jul;131(7):1904-46. DOI: 10.1086/723635
• dc.identifier.doi http://dx.doi.org/10.1086/723635
• dc.identifier.issn 0022-3808
• dc.identifier.uri http://hdl.handle.net/10230/59398
• dc.language.iso eng
• dc.publisher University of Chicago Press
• dc.relation.ispartof Journal of political economy. 2023 Jul;131(7):1904-46
• dc.relation.isreferencedby http://dx.doi.org/10.7910/DVN/ULSBAB
• dc.relation.projectID info:eu-repo/grantAgreement/EC/FP7/324048
• dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/788547
• dc.relation.projectID info:eu-repo/grantAgreement/ES/2PE/CEX2019-000915-S
• dc.rights © 2023 The University of Chicago. All rights reserved.
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.subject.keyword Fiscal policy
• dc.subject.keyword Factor taxation
• dc.subject.keyword Pareto-improving tax reform
• dc.subject.keyword Redistribution
• dc.title Pareto-improving optimal capital and labor taxes
• dc.type info:eu-repo/semantics/article
• dc.type.version info:eu-repo/semantics/acceptedVersion