Arbeitspapier
Progressive taxation and (in)stability in an exogenous growth model with Epstein-Zin recursive preferences
We show that in a exogenous growth model with Epstein-Zin (1989, 1991) recursive preferences calibrated to Bulgarian data under the progressive taxation regime (1993- 2007), the economy exhibits equilibrium indeterminacy. These results are in line with the fi ndings in Benhabib and Farmer (1994, 1996) and Farmer (1999). Also, the findings in this paper are in contrast to Guo and Lansing (1988) who argue that progressive taxation works as an automatic stabilizer. In contrast, under the flat tax regime (2008-16), the same economy calibrated to Bulgarian data now displays saddle-path stability. The decrease in the average effective tax rate addresses the indeterminacy issue and eliminates the "sink" dynamics.
- Language
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Englisch
- Classification
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Wirtschaft
Exchange and Production Economies
Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
- Subject
-
Progressive taxation
Epstein-Zin preferences
Equilibrium (In)determinacy
Bulgaria
- Event
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Geistige Schöpfung
- (who)
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Vasilev, Aleksandar
- Event
-
Veröffentlichung
- (who)
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ZBW – Leibniz Information Centre for Economics
- (where)
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Kiel, Hamburg
- (when)
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2018
- Handle
- Last update
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10.03.2025, 11:45 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Vasilev, Aleksandar
- ZBW – Leibniz Information Centre for Economics
Time of origin
- 2018
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