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Tax Incidence in Dynamic Economies with Externalities and Endogenous Labor Supply

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Title: Tax Incidence in Dynamic Economies with Externalities and Endogenous Labor Supply
Authors: Amano, Daisuke Browse this author
Itaya, Jun-ichi Browse this author →KAKEN DB
Mino, Kazuo Browse this author
Keywords: Tax incidence
indeterminacy and endogenous labor supply
Issue Date: 9-Nov-2007
Publisher: Graduate School of Economics and Business Administration, Hokkaido University
Journal Title: Discussion Paper, Series A
Volume: 192
Start Page: 1
End Page: 30
Abstract: This paper examines the long-run incidence of factor income taxes and expenditure taxes in an infinitely lived representative agent growth model which allows both for production externalities and for endogenous labor supply. The novelty of this paper is its investigating of how the long-run incidence of taxes is affected by indeterminacy of equilibria that is caused mainly by nonseparable preferences between consumption and leisure. We show that the effects of the taxes on steady state welfare as well as the steady state levels of consumption, capital, and employment are all negative regardless of whether a steady state is determinate or indeterminate in an exogenous growth model. By contrast, in an endogenous growth model those distortionary taxes are growth and welfare enhancing in both a determinate steady state featuring the unconventional slope of the labor supply curve and an indeterminate steady state featuring its conventional slope. (JEL classifications: H41, F13, D62)
Type: bulletin (article)
Appears in Collections:Discussion paper > Series A

Submitter: 板谷 淳一

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