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Demographics and the politics of capital taxation in a life-cycle economy

Demographics and the politics of capital taxation in a life-cycle economy
Demographics and the politics of capital taxation in a life-cycle economy
This article studies the effects of demographics on the mix of tax rates on labour and capital. It uses a quantitative general-equilibrium overlapping-generations model where tax rates are voted without past commitments in every period and characterized as a Markov equilibrium. In the U.S., the younger voting-age population in 1990 compared to 1965 accounts for the observed decline in the relative capital tax rate between those two years. A younger population rises the net return to capital, leads voters to increase their savings, and results in a preference for lower taxes on capital
Conversely, ageing might increase capital taxation.

markov policies, demographic change, capital and labor taxation
0966-4246
909
University of Southampton
Mateos-Planas, Xavier
444f69bb-2ab3-4f56-be17-3f286f7700da
Mateos-Planas, Xavier
444f69bb-2ab3-4f56-be17-3f286f7700da

Mateos-Planas, Xavier (2009) Demographics and the politics of capital taxation in a life-cycle economy (Discussion Papers in Economics and Econometrics, 909) Southampton, UK. University of Southampton 48pp.

Record type: Monograph (Discussion Paper)

Abstract

This article studies the effects of demographics on the mix of tax rates on labour and capital. It uses a quantitative general-equilibrium overlapping-generations model where tax rates are voted without past commitments in every period and characterized as a Markov equilibrium. In the U.S., the younger voting-age population in 1990 compared to 1965 accounts for the observed decline in the relative capital tax rate between those two years. A younger population rises the net return to capital, leads voters to increase their savings, and results in a preference for lower taxes on capital
Conversely, ageing might increase capital taxation.

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More information

Published date: 2009
Keywords: markov policies, demographic change, capital and labor taxation

Identifiers

Local EPrints ID: 71047
URI: http://eprints.soton.ac.uk/id/eprint/71047
ISSN: 0966-4246
PURE UUID: 8eeb3108-0974-4612-b99a-f003152acb2d

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Date deposited: 13 Jan 2010
Last modified: 13 Mar 2024 20:19

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Contributors

Author: Xavier Mateos-Planas

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