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| Author: | Felder, S. |
| Title: | Tax reform in a two-class growth model |
| Journal: | Empirical Economics
1997 : VOL. 22:2, p. 273-293 |
| Index terms: | TAX REFORM SIMULATION WELFARE DISTRIBUTION ECONOMETRIC MODELS |
| Language: | eng |
| Abstract: | This article analyses the welfare and distributional effects of tax reforms in a two-class model with an exogenous labor supply. The empirically calibrated , standard life-cycle model is extended to include pure life-cycle savers and households with an altruistic bequest motive. The tax reform simulations cover the move from an income to a wage and consumption tax. The article studies the role of borrowing constraints, and performs a dynamic analysis of tax reforms using a static expectation approach. The results indicate that the two tax reforms have different impacts on the welfare of the two classes: The altruistically motivated households gain more under a wage tax, while the pure life-cycle savers are better off with the consumption tax. |
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