Supply-side Optimal Capital Taxation with Endogenous Wage Inequality

2021 ◽  
Author(s):  
Wenjian Li
Keyword(s):  
Wage Inequality ◽  
Supply Side ◽  
Capital Taxation ◽  
Optimal Capital

Supply-side optimal capital taxation with endogenous wage inequality

2021 ◽  
Vol 198 ◽  
pp. 104421
Author(s):  
Xiaoyong Cui ◽  
Liutang Gong ◽  
Wenjian Li
Keyword(s):  
Wage Inequality ◽  
Supply Side ◽  
Capital Taxation ◽  
Optimal Capital

scholarly journals A Simpler Theory of Optimal Capital Taxation

2016 ◽  
Author(s):  
Emmanuel Saez ◽  
Stefanie Stantcheva
Keyword(s):  
Capital Taxation ◽  
Optimal Capital

A NOTE ON OPTIMAL CAPITAL TAXATION WITH PREFERENCE EXTERNALITIES

2018 ◽  
Vol 24 (3) ◽  
pp. 729-746 ◽  
Author(s):  
Cheng-Wei Chang ◽  
Ching-Chong Lai
Keyword(s):  
The United States ◽  
Income Taxes ◽  
Income Taxation ◽  
Capital Taxation ◽  
Neoclassical Growth Model ◽  
Factor Income ◽  
Status Seeking ◽  
Capital Tax ◽  
Optimal Capital ◽  
Neoclassical Growth

This paper extends the Chamley–Judd framework by introducing preference externalities in a neoclassical growth model, and finds that the optimal capital tax increases with the extent of social-status seeking or negative leisure externalities. Furthermore, this paper finds that differences in leisure externalities lead to a distinct impact on optimal factor income taxes, and hence may serve as a plausible vehicle to explain the empirical differences in factor income taxation in the United States and Europe.

scholarly journals Factor Proportions and Relative Wages: The Supply-Side Determinants of Wage Inequality

1997 ◽  
Vol 11 (2) ◽  
pp. 55-74 ◽  
Author(s):  
Robert H Topel
Keyword(s):  
Human Capital ◽  
Young People ◽  
Labor Force Participation ◽  
Wage Inequality ◽  
Capital Investment ◽  
Supply Side ◽  
High Wage ◽  
Relative Wages ◽  
Women's Participation ◽  
Supply Side Factors

Supply-side factors may contribute to rising wage inequality. First, certain changes in the supply of skills allegedly exacerbate wage inequality. Women's increased labor force participation and increased immigration are the leading candidates; both allegedly reduce the wages of less-skilled men. However, immigration's impact on wage inequality has been minor and the effects of women's participation is inconclusive. Second, in evaluating the likelihood that human capital investment will mitigate future inequality, evidence suggests that rising returns to education have increased the proportion of young people attending college, limiting the growth of inequality among high-wage workers.

Transitional Dynamics of Optimal Capital Taxation

1998 ◽  
Vol 2 (4) ◽  
pp. 492-503 ◽  
Author(s):  
David M. Frankel
Keyword(s):  
Steady State ◽  
Capital Stock ◽  
Marginal Utility ◽  
Golden Rule ◽  
High Rate ◽  
Relative Risk Aversion ◽  
Capital Taxation ◽  
Long Run ◽  
Short Run ◽  
Optimal Capital

A known result holds that capital taxes should be high in the short run and low or zero in the long-run steady state. This paper studies the dynamics of optimal capital taxation during the transition, when a high rate is no longer optimal but the economy is still in flux. The main result is that capital should be taxed whenever the sum of the elasticities of marginal utility with respect to consumption and labor supply are rising and subsidized whenever this sum is falling. If the utility function displays increasing relative risk aversion, this paradoxically implies that capital should be taxed when the capital stock is below the modified golden-rule level and subsidized whenever it exceeds this level. Thus, savings incentives sometimes can be more desirable when the capital stock is large than when it is small.

scholarly journals Optimal capital taxation in an economy with innovation-driven growth

2021 ◽  
pp. 1-34
Author(s):  
Ping-Ho Chen ◽  
Angus C. Chu ◽  
Hsun Chu ◽  
Ching-Chong Lai
Keyword(s):  
Growth Model ◽  
Creative Destruction ◽  
Capital Taxation ◽  
Tax Rate ◽  
Us Economy ◽  
The Us ◽  
Capital Tax ◽  
Optimal Capital

Abstract This paper investigates optimal capital taxation in an innovation-driven growth model. We examine how the optimal capital tax rate varies with externalities associated with R&D and innovation. Our results show that the optimal capital tax rate is higher when (i) the “stepping on toes effect” is smaller, (ii) the “standing on shoulders effect” is stronger, or (iii) the extent of creative destruction is smaller. The optimal capital tax rate is more likely to be positive when there is underinvestment in R&D. Moreover, the optimal capital tax rate and the monopolistic markup exhibit an inverted-U relationship. By calibrating our model to the US economy, we find that the optimal capital tax rate is positive, at a rate of around 6.6%. Finally, we consider a number of extensions and find that the result of a positive optimal capital tax is robust.

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