Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96905
Authors: 
Mattauch, Linus
Edenhofer, Ottmar
Klenert, David
Bénard, Sophie
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4714
Abstract: 
We study the impact of heterogeneous saving behavior on the distributional effects of public investment. A capital tax is levied to finance productive public capital in an economy with two types of households: high income households who save dynastically and middle income households who save for retirement. We find that inequality is reduced the higher the capital tax rate and that low rates even constitute a Pareto-improvement. There is thus no clear-cut trade-off between efficiency and inequality: middle income households’ consumption is maximal at a higher capital tax rate than high income households’ consumption.
Subjects: 
public capital
wealth disparity
inequality
household heterogeneity
Pasinetti Paradox
saving behavior
JEL: 
E60
H23
H31
H40
H54
Document Type: 
Working Paper

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