The paper studies the dynamic macroeconomic and welfare effects of tax policy in the context of an overlapping-generations model of the Yaari-Blanchard type for a closed economy. The model is extended to allow for endogenous labor supply and three tax instruments—namely, a capital tax, labor income tax, and consumption tax. It is shown that labor taxes increase welfare of old generations wherea...

This Issue Brief addresses three questions raised by recent trends in personal saving: How are national savings measured and what is the meaning of the trends in measured personal saving rates, given what is included and what is not included in those measures? What is the effect of retirement saving programs--in particular, 401(k) plans and individual retirement accounts (IRAs)--on personal sav...

I show that, in the absence of complete insurance markets, progressive taxation of labor income may provide productivity and welfare gains as compared to a revenueequivalent proportional tax. In order to increase income in the future, individuals have to forgo income today by accepting lower wages while accumulating human capital or when destroying specific human capital in order to build it el...

We determine su cient conditions to establish the supermodularity of a n asymmetric country tax competition, when countries maximize their tax revenue. Using a notion of generalized concavity, namelyρ−concavity, we establish that the tax competition game is supermodular when the marginal production function of each country is log-concave and 1/2-convex. Alternative su cient conditions for the s...

In this paper we examine the importance of imperfect competition in product and labour markets in determining the long-run welfare effects of tax reforms assuming agent heterogeneneity in capital holdings. Each of these market failures, independently, results in welfare losses for at least a segment of the population, after a capital tax cut and a concurrent labour tax increase. However, when c...

A neoclassical growth model is augmented by a corporate sector, financial intermediation, and a set of tax rates. In this setting, capital structure is determined by the interplay between a tax advantage of debt finance and costly state verification entailed by asymmetric information. Effects of capital tax reforms are investigated with a special focus on this micro-founded credit channel of ta...