Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/29932 
Authors: 
Year of Publication: 
2009
Series/Report no.: 
Ruhr Economic Papers No. 113
Publisher: 
Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI), Essen
Abstract: 
It has been shown that higher capital taxes can have a growth-enhancing effect when combined with a revenue-compensating cut in wage taxes (Uhlig and Yanagawa 1996; European Economic Review 40, 1521-1540) or with an expansion in productivity-increasing public services (Rivas 2003; European Economic Review 47, 477-503). The present paper demonstrates that these results critically hinge on the existence of a bequest motive. It is shown that a wage-tax cut is no longer growth-enhancing when bequests are operative. By way of contrast, increasing productive public services may well boost growth. The theoretical findings are illustrated by numerical simulations based on US data.
Subjects: 
Capital income taxation
public spending
overlapping generations
growth
family altruism
JEL: 
D64
D91
H24
H50
O40
ISBN: 
978-3-86788-126-5
Document Type: 
Working Paper

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