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Efficient Tax Reform in a Dynamic Model of General Equilibrium

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  • Christophe Chamley

Abstract

The welfare gain of a shift from capital to a labor income tax is determined in a model of intertemporal optimization with infinite horizon and variable labor supply. The welfare impact of small tax changes is computed by an approximation method around the steady state. When the difference between the growth rate and the discount rate is small, the welfare impact of tax reform depends mainly on the parameters of the production function.

Suggested Citation

  • Christophe Chamley, 1985. "Efficient Tax Reform in a Dynamic Model of General Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(2), pages 335-356.
    • Handle: RePEc:oup:qjecon:v:100:y:1985:i:2:p:335-356.
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    File URL: http://hdl.handle.net/10.2307/1885385
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    Cited by:

    1. Sigitas Karpavicius, 2009. "The Effects of Fiscal Instruments on the Economy of Lithuania," Bank of Lithuania Working Paper Series 4, Bank of Lithuania.
    2. Wen-ya Chang & Hsueh-fang Tsai, 2006. "On Dynamic Tax Reform with Regime Switching," Public Finance Review, , vol. 34(3), pages 306-327, May.
    3. Long, Xin & Pelloni, Alessandra, 2017. "Factor income taxation in a horizontal innovation model," Journal of Public Economics, Elsevier, vol. 154(C), pages 137-159.
    4. Hung-Ju Chen & Been-Lon Chen & Ping Wang, 2010. "Taxing Capital is Not a Bad Idea Indeed: The Role of Human Capital and Labor-Market Frictions," 2010 Meeting Papers 827, Society for Economic Dynamics.
    5. Muhammad Islam, 1998. "Intertemporally Dependent Preferences and the Welfare Cost of Capital Income Taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(4), pages 489-498, October.
    6. Keshab Bhattarai, 2007. "Input–Output and General Equilibrium Models for Hull and Humber Region in England," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 35(4), pages 473-490, December.
    7. Vincent Touzé, 2009. "Incidence fiscale des retraites par répartition. Une exploration analytique," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(4), pages 103-124.
    8. Long Xin & Pelloni Alessandra, 2011. "Welfare improving taxation on savings in a growth model," wp.comunite 0091, Department of Communication, University of Teramo.
    9. McGee, M. Kevin, 1989. "Alternative Transitions to a Consumption Tax," National Tax Journal, National Tax Association;National Tax Journal, vol. 42(2), pages 155-166, June.
    10. Barbara Annicchiarico & Valentina Antonaroli & Alessandra Pelloni, 2022. "Optimal factor taxation in a scale free model of vertical innovation," Economic Inquiry, Western Economic Association International, vol. 60(2), pages 794-830, April.
    11. Keshab Raj BHATTARAI, 2009. "Dynamic Multi-Household General Economic Models for Policy Simulations: France, Germany, Spain and UK," EcoMod2009 21500014, EcoMod.
    12. Chamley, Christophe, 1992. "The welfare cost of taxation and endogenous growth," UC3M Working papers. Economics 2890, Universidad Carlos III de Madrid. Departamento de Economía.
    13. Roland Benabou, 2002. "Tax and Education Policy in a Heterogeneous-Agent Economy: What Levels of Redistribution Maximize Growth and Efficiency?," Econometrica, Econometric Society, vol. 70(2), pages 481-517, March.
    14. Valentinyi, Ákos, 2001. "A tőkejövedelem optimális adóztatása [The optimal taxation of capital income]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 459-479.
    15. Roland Benabou, 1996. "Unequal Societies," NBER Working Papers 5583, National Bureau of Economic Research, Inc.
    16. Wen-ya Chang & Hsueh-fang Tsai & Juin-jen Chang & Kuo-Hao Lee, 2015. "Consumption tax, seigniorage tax and tax switch in a cash-in-advance economy of endogenous growth," Journal of Economics, Springer, vol. 114(1), pages 23-42, January.
    17. Vincent Touzé, 2005. "Fiscal incidence of unfunded pension system: an analytical investigation," Documents de Travail de l'OFCE 2005-03, Observatoire Francais des Conjonctures Economiques (OFCE).
    18. Minea, Alexandru, 2008. "The Role of Public Spending in the Growth Theory Evolution," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 5(2), pages 99-120, June.

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