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| Author: | Michel, P. Paul, T. |
| Title: | Time-consistent linear taxation and redistribution in an overlapping-generations framework |
| Journal: | Oxford Economic Papers
2002 : APR, VOL. 54:2, p. 247-269 |
| Index terms: | Taxation Utility functions Statistical methods Models Economic theory |
| Freeterms: | Comparative analysis |
| Language: | eng |
| Abstract: | Time-consistent labour and capital income linear taxation are studied using an infinite-horizon overlapping-generations model of a small open economy. Individuals have different productivities and the government intervenes for purely redistributive purposes. The study of time-consistent taxation requires the introduction of borrowing restrictions in the economy. The time-consistent solution is characterised and alternative solutions based on a simple tax rule are considered. The existence and the uniqueness of the time-consistent solution is demonstrated using a log-linear utility function. Numerical comparisons btw. time-consistent and time-inconsistent linear taxation are provided: the importance of being able to make commitment decreases when the differences btw. individuals increase. |
SCIMA