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| Author: | Chamley. C. |
| Title: | Capital income taxation, wealth distribution and borrowing constraints |
| Journal: | Journal of Public Economics
2001 : JAN, VOL. 79:1, p. 55-69 |
| Index terms: | BORROWING CAPITAL INCOME TAX DISTRIBUTION OF WEALTH |
| Language: | eng |
| Abstract: | The theorem of zero taxation of capital income is reexamined and is shown to hinge critically on the assumptions of a long horizon and perfect markets for the inter-temporal allocation of resources. The theorem does not hold when borrowing constraints prevent individuals from insuring against idiosyncratic shocks and have a precautionary motive for savings. Structural assumptions are made such that with no taxation, aggregate savings are socially "excessive" in the long-run, i.e. the rate of return is smaller than the discount rate. |
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