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Business Cycles with Progressive Income Taxation

Author

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  • wei-bin zhang

    (Ritsumeikan Asia Pacific University)

Abstract

The paper generalizes the two-sector growth model for a small-open economy with endogenous wealth accumulation and public goods proposed by Zhang (2016). The main generalization is to allow all the time-independent parameters in Zhang?s model to be time-dependent. The generalization makes it possible to take any exogenous changes in any parameter at any time into account. The model is constructed in a dynamic general equilibrium framework with heterogeneous households and progressive income taxation. We simulate the model to demonstrate existence of equilibrium and motion of the dynamic system. We demonstrate how business cycles appear in the economic system when it is confronted with different exogenous periodic perturbations.

Suggested Citation

  • wei-bin zhang, 2017. "Business Cycles with Progressive Income Taxation," International Journal of Business and Management, International Institute of Social and Economic Sciences, vol. 5(2), pages 78-95, November.
    • Handle: RePEc:sek:jijobm:v:5:y:2017:i:2:p:78-95
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    References listed on IDEAS

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    More about this item

    Keywords

    business cycle; progressive income taxation; wealth accumulation; Walrasian theory; endogenous labor supply;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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