Progressive taxation and macroeconomic stability in two-sector models with social constant returns

Been Lon Chen; Mei Hsu; Yu Shan Hsu

doi:10.1007/s00712-018-0596-2

Progressive taxation and macroeconomic stability in two-sector models with social constant returns

Been Lon Chen^*, Mei Hsu, Yu Shan Hsu

^*Corresponding author for this work

Department of Business Administration

Research output: Contribution to journal › Article › peer-review

5 Citations (Scopus)

Abstract

It has been shown that, in the two-sector Benhabib–Farmer–Guo model with technologies of social increasing returns that exhibits indeterminacy, progressive income taxes de-stabilize the economy. This paper revisits the robustness of the tax implication in the two-sector Benhabib–Nishimura model with technologies of social constant returns that exhibits indeterminacy. We show that a progressive income tax stabilizes the economy against sunspot fluctuations, and thus the tax implication based on the two-sector Benhabib–Farmer–Guo model is not robust.

Original language	English
Pages (from-to)	51-68
Number of pages	18
Journal	Journal of Economics/ Zeitschrift fur Nationalokonomie
Volume	125
Issue number	1
DOIs	https://doi.org/10.1007/s00712-018-0596-2
Publication status	Published - 2018 Sept 1

Keywords

Indeterminacy
No-income-effect utility
Progressive income taxes
Social constant returns
Two-sector model

ASJC Scopus subject areas

General Business,Management and Accounting
Economics and Econometrics

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10.1007/s00712-018-0596-2

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title = "Progressive taxation and macroeconomic stability in two-sector models with social constant returns",

abstract = "It has been shown that, in the two-sector Benhabib–Farmer–Guo model with technologies of social increasing returns that exhibits indeterminacy, progressive income taxes de-stabilize the economy. This paper revisits the robustness of the tax implication in the two-sector Benhabib–Nishimura model with technologies of social constant returns that exhibits indeterminacy. We show that a progressive income tax stabilizes the economy against sunspot fluctuations, and thus the tax implication based on the two-sector Benhabib–Farmer–Guo model is not robust.",

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T1 - Progressive taxation and macroeconomic stability in two-sector models with social constant returns

AU - Chen, Been Lon

AU - Hsu, Mei

AU - Hsu, Yu Shan

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N2 - It has been shown that, in the two-sector Benhabib–Farmer–Guo model with technologies of social increasing returns that exhibits indeterminacy, progressive income taxes de-stabilize the economy. This paper revisits the robustness of the tax implication in the two-sector Benhabib–Nishimura model with technologies of social constant returns that exhibits indeterminacy. We show that a progressive income tax stabilizes the economy against sunspot fluctuations, and thus the tax implication based on the two-sector Benhabib–Farmer–Guo model is not robust.

AB - It has been shown that, in the two-sector Benhabib–Farmer–Guo model with technologies of social increasing returns that exhibits indeterminacy, progressive income taxes de-stabilize the economy. This paper revisits the robustness of the tax implication in the two-sector Benhabib–Nishimura model with technologies of social constant returns that exhibits indeterminacy. We show that a progressive income tax stabilizes the economy against sunspot fluctuations, and thus the tax implication based on the two-sector Benhabib–Farmer–Guo model is not robust.

KW - Indeterminacy

KW - No-income-effect utility

KW - Progressive income taxes

KW - Social constant returns

KW - Two-sector model

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Progressive taxation and macroeconomic stability in two-sector models with social constant returns

Abstract

Keywords

ASJC Scopus subject areas

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