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Optimal Capital Taxation in A Neoclassical Growth Model

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This paper studies the optimal factor tax incidence in a neoclassical growth model with a given share of government expenditure in output. In the Ramsey planner’s optimization, the effect of next period’s capital on government expenditure equals the given share of the marginal product of capital. Capital accumulation reduces the discounted net marginal product of next period’s capital by way of increasing government expenditure. In order to internalize the distortion, it is optimal to tax capital income in the long run.

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  • Chia-Hui Lu & Been-Lon Chen, 2013. "Optimal Capital Taxation in A Neoclassical Growth Model," IEAS Working Paper : academic research 13-A005, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    • Handle: RePEc:sin:wpaper:13-a005
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    Cited by:

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    2. F. J. Escribá‐Pérez & M. J. Murgui‐García & J. R. Ruiz‐Tamarit, 2023. "Endogenous capital stock and depreciation in the United States," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(1), pages 139-167, February.
    3. Moccia, Luigi & Laporte, Gilbert, 2016. "Improved models for technology choice in a transit corridor with fixed demand," Transportation Research Part B: Methodological, Elsevier, vol. 83(C), pages 245-270.

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    More about this item

    Keywords

    Optimal factor taxation; efficiency;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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