Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/122035
Authors: 
Hartwick, John
Year of Publication: 
2015
Series/Report no.: 
Queen's Economics Department Working Paper 1339
Abstract: 
We set out and solve a static neoclassical model with a labor/leisure choice for agents and a government sector producing a Samuelsonian public good. Numerical solutions vary considerably with the elasticity of substitution for commodities in an agent's utility function. We focus on solutions with an income tax rate set by the government (second best solutions). Government revenue varies with the rate of income tax (expressed in a Laffer Curve) and we observe that such curves generally peak "internally" only for case of "high" elasticity values in the utility function of a representative agent. Inelastic substitution possibilities involve the peaking of the Laffer Curve at a corner with the rate of income tax tending to unity. We report on welfare analysis for small changes in the rate of income tax and on first best outcomes (agents charged Samuelson "prices" for the public good).
Subjects: 
Laffer curves
public goods
income tax incidence
JEL: 
H22
H24
H41
Document Type: 
Working Paper

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