TY - JOUR
T1 - Optimal Positive Capital Taxes at Interior Steady States
AU - Benhabib, Jess
AU - Szo˝ke, Bálint
N1 - Publisher Copyright:
© 2021
PY - 2021/1
Y1 - 2021/1
N2 - We generalize recent results of Bassetto and Benhabib (2006) and Straub and Werning (2019) in a neoclassical model with endogenous labor-leisure choice where all agents are allowed to save and accumulate capital. We provide a sufficient condition under which optimal redistributive capital taxes remain at their allowed upper bound forever, even if the resulting equilibrium trajectory converges to a unique steady state with positive and finite consumption, capital, and labor. We then provide an interpretation of our sufficient condition. Using recent evidence on wealth distribution in the United States, we argue that our sufficient condition is empirically plausible.
AB - We generalize recent results of Bassetto and Benhabib (2006) and Straub and Werning (2019) in a neoclassical model with endogenous labor-leisure choice where all agents are allowed to save and accumulate capital. We provide a sufficient condition under which optimal redistributive capital taxes remain at their allowed upper bound forever, even if the resulting equilibrium trajectory converges to a unique steady state with positive and finite consumption, capital, and labor. We then provide an interpretation of our sufficient condition. Using recent evidence on wealth distribution in the United States, we argue that our sufficient condition is empirically plausible.
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U2 - 10.1257/mac.20180191
DO - 10.1257/mac.20180191
M3 - Article
AN - SCOPUS:85110932212
SN - 1945-7707
VL - 13
SP - 114
EP - 150
JO - American Economic Journal: Macroeconomics
JF - American Economic Journal: Macroeconomics
IS - 1
ER -