Angelopoulos, K. , Asimakopoulos, S. and Malley, J. (2015) Tax smoothing in a business cycle model with capital-skill complementarity. Journal of Economic Dynamics and Control, 51, pp. 420-444. (doi: 10.1016/j.jedc.2014.11.002)
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Publisher's URL: http://dx.doi.org/10.1016/j.jedc.2014.11.002
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.
| Item Type: | Articles |
|---|---|
| Status: | Published |
| Refereed: | Yes |
| Glasgow Author(s) Enlighten ID: | Malley, Professor Jim and Angelopoulos, Dr Konstantinos and Asimakopoulos, Mr Stylianos |
| Authors: | Angelopoulos, K., Asimakopoulos, S., and Malley, J. |
| College/School: | College of Social Sciences > Adam Smith Business School > Economics |
| Journal Name: | Journal of Economic Dynamics and Control |
| Publisher: | Elsevier |
| ISSN: | 0165-1889 |
| ISSN (Online): | 1879-1743 |
| Copyright Holders: | Copyright © 2014 The Authors |
| First Published: | First published in Journal of Economic Dynamics and Control 51:420-444 |
| Publisher Policy: | Reproduced under a Creative Commons License |
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