Optimal taxation in a two sector economy with heterogeneous agents : WestminsterResearch

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Title	Optimal taxation in a two sector economy with heterogeneous agents
Authors	Selim, S.
Abstract	In this paper we examine the optimal taxation problem in a two sector economy with heterogeneous agents. We show that in a steady state of this economy the optimal capital income tax rate can be different from zero. In this economy since capital and labour margins are interdependent, any difference in investment goods and consumption goods prices allows the government to tax capital income in one sector and undo the tax distortion by differential labour income taxation. This policy serves efficiency purpose as it restores the production efficiency condition.
Journal	Economics Bulletin
Journal citation	30 (1), pp. 534-542
ISSN	1545-2921
Year	2010
Publisher	Economics Bulletin
Web address (URL)	http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I1-P49.pdf
Published	2010

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Optimal taxation in a two sector economy with heterogeneous agents

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