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Appears in Collections:Economics Journal Articles
Peer Review Status: Refereed
Title: Tax smoothing in a business cycle model with capital-skill complementarity
Author(s): Angelopoulos, Konstantinos
Asimakopoulos, Stylianos
Malley, James R
Keywords: Skill premium
Tax smoothing
Optimal fiscal policy
Issue Date: Feb-2015
Date Deposited: 20-Aug-2015
Citation: Angelopoulos K, Asimakopoulos S & Malley JR (2015) Tax smoothing in a business cycle model with capital-skill complementarity. Journal of Economic Dynamics and Control, 51, pp. 420-444.
Abstract: This paper undertakes a normative investigation of the quantitative properties of optimal tax smoothing in a business cycle model with state contingent debt, capital-skill complementarity and endogenous skill acquisition under technology and public expenditure shocks. We find that skilled and unskilled labour tax smoothing maintain quantitatively under externalities and exogenous shocks in skill acquisition, as well as when the relative skill supply is exogenously determined. We further find that the government finds it optimal to reduce both the size of the wedge between the marginal rates of substitution and transformation in skill attainment in the long-run and the standard deviation of this wedge over the business cycle. This is achieved by subsidising skill creation and taxing both types of labour income.
DOI Link: 10.1016/j.jedc.2014.11.002
Rights: This article is available under the terms of the Creative Commons Attribution License (CC BY). You may distribute and copy the article, create extracts, abstracts, and other revised versions, adaptations or derivative works of or from an article (such as a translation), to include in a collective work (such as an anthology), to text or data mine the article, including for commercial purposes without permission from Elsevier. The original work must always be appropriately credited.
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