Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/46310
Authors: 
Angelopoulos, Konstantinos
Malley, James R.
Philippopoulos, Apostolis
Year of Publication: 
2011
Series/Report no.: 
CESifo working paper: Fiscal Policy, Macroeconomics and Growth 3444
Abstract: 
This paper studies the aggregate and distributional implications of Markov-perfect taxspending policy in a neoclassical growth model with capitalists and workers. Focusing on the long run, our main findings are: (i) it is optimal for a benevolent government, which cares equally about its citizens, to tax capital heavily and to subsidise labour; (ii) a Pareto improving means to reduce inefficiently high capital taxation under discretion is for the government to place greater weight on the welfare of capitalists; (iii) capitalists and workers preferences, regarding the optimal amount of 'capitalist bias', are not aligned implying a conflict of interests.
Subjects: 
optimal fiscal policy
Markov-perfect equilibrium
heterogeneous agents
JEL: 
E62
H21
Document Type: 
Working Paper

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