Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/319213 
Authors: 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11845
Publisher: 
CESifo GmbH, Munich
Abstract: 
The optimal capital income tax rate has been shown to be nonzero in overlapping generations (OLG) models, as it helps redistribute income between cohorts and individuals with different labor supply elasticities and individual productivities. We show in a medium-scale OLG model that the optimal capital income tax rate is highly sensitive to the assumption of capital-skill complementarity in production technology. The imposition of the production function of Krusell et al. (2000) rather than the standard Cobb - Douglas function increases the optimal capital tax from 9.2% to 27.3% in our benchmark model. We also study the sensitivity of this result in the context of an aging economy and find that the optimal capital income tax increases over the upcoming decades depending on possible pension reforms and debt policies.
Subjects: 
capital income taxes
Chamley-Judd result
skill-biased technological change
demographic change.
JEL: 
E13
H21
H24
H25
Document Type: 
Working Paper
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