Chen, Yan and Zhang, Yan (2008): Are Progressive Income Taxes Stabilizing? : A Reply.
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Dromel and Pintus [Are Progressive Income Taxes Stabilizing?, Journal of Public Economic Theory 10, (2008) 329-349] have shown that labor-income tax progressivity reduces the likelihood of local indeterminacy, sunspots and cycles in a one sector monetary economy with constant returns to scale. In this note, we extend Dromel and Pintus (2008) into a two sector monetary economy with constant returns to scale studied by Bosi et al. (2007) and reassess the stabilizing effect of progressive income taxes. We show that the result in Dromel and Pintus (2008) is robust to this extension, which means that changes of the production structure won't affect the stabilizing effect of progressive income taxes, i.e., tax progressivity (regressivity) reduces (increases) the likelihood of local indeterminacy, sunspots and cycles.
|Item Type:||MPRA Paper|
|Original Title:||Are Progressive Income Taxes Stabilizing? : A Reply|
|Keywords:||Tax Progressivity, local indeterminacy|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
P - Economic Systems > P3 - Socialist Institutions and Their Transitions > P35 - Public Economics
|Depositing User:||Yan Zhang|
|Date Deposited:||08. Nov 2008 15:55|
|Last Modified:||16. Feb 2013 00:58|
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