Optimal Fiscal Policy with Consumption Taxation

Motta, Giorgio Enrico and Rossi, Raffaele (2019) Optimal Fiscal Policy with Consumption Taxation. Journal of Money, Credit and Banking, 51 (1). pp. 139-161. ISSN 0022-2879

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Abstract

We characterise optimal fiscal policies in a General Equilibrium model with monopolistic competition and endogenous public spending. The government can tax consumption, as alternative to labour income taxes. Consumption taxation acts as indirect taxation of prots (intratemporal gains of taxing consumption) and enables the policy-maker to manage the burden of public debt more efficiently (intertemporal gains of taxing consumption). We show analytically that these two gains imply that the optimal share of government spending is higher under consumption taxation than with labour income taxation. Then, we quantify numerically each of these gains by calibrating the model on the US economy.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Money, Credit and Banking
Additional Information:
This is the peer reviewed version of the following article: MOTTA, G. and ROSSI, R. (2018), Optimal Fiscal Policy with Consumption Taxation. Journal of Money, Credit and Banking. . doi:10.1111/jmcb.12544 which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/jmcb.12544/abstract This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/1400/1402
Subjects:
ID Code:
124969
Deposited By:
Deposited On:
01 May 2018 15:22
Refereed?:
Yes
Published?:
Published
Last Modified:
18 Sep 2020 04:11