Nonlinear taxation in an economy with heterogeneous firms and heterogeneous households

Date
2017
Journal Title
Journal ISSN
Volume Title
Publisher
James A. Baker III Institute for Public Policy
Abstract

In an economy with heterogeneous firms and heterogeneous consumers, we describe a general equilibrium where firm equity is priced by a supply and demand process. With a model robust to arbitrary, nonlinear tax functions, we investigate the efficiency of replacing the current U.S. tax regime with a policy of no corporate taxes and taxation of capital distributions to the household at progressive personal income tax rates. We find that this policy reduces wealth inequality and increases total welfare.

Description
Advisor
Degree
Type
Working paper
Keywords
heterogeneous households, heterogeneous firms, capital taxation, asset-pricing in incomplete markets
Citation

Barro, Jorge and Berkovich, Efraim. "Nonlinear taxation in an economy with heterogeneous firms and heterogeneous households." (2017) James A. Baker III Institute for Public Policy: https://www.bakerinstitute.org/research/barro-working-paper/.

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