This paper studies the efficient taxation of money and factor income in intertemporal optimizing growth models with infinite horizons, transaction costs technologies, and flexible prices. Second-best optimality calls for a positive inflation tax and a nonzero capital income tax when there are restrictions on taxation of production factors or profits/rents. Our cases of nonoptimality of the Friedman rule—which differ from those of Mulligan and Sala-i-Martin (1997) and extend substantially those of Schmitt-Grohè and Uribe (2004a)—follow from the violation of the Diamond and Mirrlees (1971) principle on production efficiency.
Titolo: | Nonoptimality of the Friedman Rule with Capital Income Taxation |
Autori: | |
Data di pubblicazione: | 2011 |
Rivista: | |
Abstract: | This paper studies the efficient taxation of money and factor income in intertemporal optimizing growth models with infinite horizons, transaction costs technologies, and flexible prices. Second-best optimality calls for a positive inflation tax and a nonzero capital income tax when there are restrictions on taxation of production factors or profits/rents. Our cases of nonoptimality of the Friedman rule—which differ from those of Mulligan and Sala-i-Martin (1997) and extend substantially those of Schmitt-Grohè and Uribe (2004a)—follow from the violation of the Diamond and Mirrlees (1971) principle on production efficiency. |
Handle: | http://hdl.handle.net/11385/8425 |
Appare nelle tipologie: | 01.1 - Articolo su rivista (Article) |