Optimal Taxation in a Two-sector Economy with Heterogeneous Agents

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Optimal Taxation in a Two-sector Economy with Heterogeneous Agents. / Selim, Sheikh.

In: Economics Bulletin, Vol. 30, No. 1, 2010, p. 534-542.

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@article{de44e0c18de74fc4bde42a62811d2bf9,
title = "Optimal Taxation in a Two-sector Economy with Heterogeneous Agents",
abstract = "In this paper we examine the optimal taxation problem in a two sector economy with heterogeneous agents. We show that in a steady state of this economy the optimal capital income tax rate can be different from zero. In this economy since capital and labour margins are interdependent, any difference in investment goods and consumption goods prices allows the government to tax capital income in one sector and undo the tax distortion by differential labour income taxation. This policy serves efficiency purpose as it restores the production efficiency condition.",
author = "Sheikh Selim",
year = "2010",
language = "English",
volume = "30",
pages = "534--542",
journal = "Economics Bulletin",
issn = "1545-2921",
publisher = "Economics Bulletin",
number = "1",

}

RIS

TY - JOUR

T1 - Optimal Taxation in a Two-sector Economy with Heterogeneous Agents

AU - Selim, Sheikh

PY - 2010

Y1 - 2010

N2 - In this paper we examine the optimal taxation problem in a two sector economy with heterogeneous agents. We show that in a steady state of this economy the optimal capital income tax rate can be different from zero. In this economy since capital and labour margins are interdependent, any difference in investment goods and consumption goods prices allows the government to tax capital income in one sector and undo the tax distortion by differential labour income taxation. This policy serves efficiency purpose as it restores the production efficiency condition.

AB - In this paper we examine the optimal taxation problem in a two sector economy with heterogeneous agents. We show that in a steady state of this economy the optimal capital income tax rate can be different from zero. In this economy since capital and labour margins are interdependent, any difference in investment goods and consumption goods prices allows the government to tax capital income in one sector and undo the tax distortion by differential labour income taxation. This policy serves efficiency purpose as it restores the production efficiency condition.

M3 - Article

VL - 30

SP - 534

EP - 542

JO - Economics Bulletin

JF - Economics Bulletin

SN - 1545-2921

IS - 1

ER -