A new NBER working paper, "Overcoming Wealth Inequality by Capital Taxes that Finance Public Investment," by Linus Mattauch, David Klenert, Joseph E. Stiglitz, and Ottmar Edenhofer
Abstract:
Wealth inequality is rising in rich countries. Capital taxation used simply to finance redistribution may not be able to counteract this trend, but can increased public investment financed by higher capital taxes? We examine how such a policy affects the distribution of wealth in a setting with distinct wealth groups: dynastic savers and life-cycle savers. Our main finding is that public investment financed through capital taxes always decreases wealth inequality when the elasticity of substitution between capital and labor is moderately high. Indeed, for all elasticities of substitution greater than a threshold value, at high enough capital tax rates, dynastic savers disappear in the long run. Below these rates, both types of households co-exist in equilibrium with life-cycle savers
gaining from the higher capital tax rates. These results are robust with respect to the different roles of public investment in production. We calibrate our model to OECD economies and find the threshold elasticity to be 0.82.
More here.
Blog Archive
-
▼
2018
(262)
-
▼
October
(15)
- First Trust Advisors' Outlook: Economy Rising
- Are we counting the benefits of cloud computing to...
- Are Cars Much Better than 50 Years Ago? - Econlib
- David Henderson Asks: Are Cars Much Better than 50...
- Third-quarter GDP cools a bit to a still-solid 3.5...
- How Scooters (and the Data They Collect) Can Trans...
- Gallup: U.S. Economic Assessments Best in Nearly T...
- The U.S. is back on top!
- New Boston Indicators analysis finds that despite ...
- Can higher capital taxes finance infrastructure an...
- Notable read: James Dorn on Leland B. Yeager
- U.S. Employment Situation: 3.7% unemployment rate ...
- Fake News Comes to Academia - WSJ
- September 2018 ADP National Employment Report : +2...
- New article from Econ Journal Watch: And the IMF S...
-
▼
October
(15)
Indicators
Test