Arbeitspapier
Structural and cyclical effects of tax progression
In a real business cycle model with labor market frictions, we find that a more progressive tax schedule reduces structural unemployment as it fosters long-run incentives for job creation. Because there exists an optimal level of unemployment in a matching environment ('Hosios condition'), tax progression improves steadystate welfare up to a certain threshold and harms it beyond that. However, tax progression increases the costs of business cycles for those consumers who can save and borrow, while it reduces the business cycle costs for households with limited asset market participation ('rule-of-thumb' consumers). Our analysis suggests that business cycle effects dominate steady-state effects. On the aggregate level, tax progression is welfare-enhancing up to a certain threshold and always shifts relative utility from optimizing to rule-of-thumb consumers. These findings are quite robust to alternative calibrations of our model.
- ISBN
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978-3-86558-912-5
- Language
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Englisch
- Bibliographic citation
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Series: Bundesbank Discussion Paper ; No. 15/2013
- Classification
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Wirtschaft
Business Fluctuations; Cycles
Fiscal Policy
- Subject
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Tax Progression
Business Cycles
Automatic Stabilizers
Welfare
- Event
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Geistige Schöpfung
- (who)
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Kremer, Jana
Stähler, Nikolai
- Event
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Veröffentlichung
- (who)
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Deutsche Bundesbank
- (where)
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Frankfurt a. M.
- (when)
-
2013
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
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
- Kremer, Jana
- Stähler, Nikolai
- Deutsche Bundesbank
Time of origin
- 2013
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Zur Diskussion über den Verbraucherpreisindex als Inflationsindikator: Beiträge zu einem Workshop in der Deutschen Bundesbank
Profitability of Western European banking systems: panel evidence on structural and cyclical determinants
Cyclical implications of minimum capital requirements
Cyclical investment behavior across financial institutions
On the cyclical properties of Hamilton's regression filter
Cyclical adjustment in fiscal rules: Some evidence on real-time bias for EU-15 countries
Structural and cyclical effects of tax progression
Corporate marginal tax rate, tax loss carryforwards and investment functions: empirical analysis using a large German panel data set
Pro-cyclical capital regulation and lending
On-the-job search and the cyclical dynamics of the labor market
Methodology and technique for determining structural budget deficits
Who benefits from using property taxes to finance a labor tax wedge reduction?
Zur Diskussion über den Verbraucherpreisindex als Inflationsindikator: Beiträge zu einem Workshop in der Deutschen Bundesbank
Profitability of Western European banking systems: panel evidence on structural and cyclical determinants
Cyclical implications of minimum capital requirements
Cyclical investment behavior across financial institutions
On the cyclical properties of Hamilton's regression filter
Cyclical adjustment in fiscal rules: Some evidence on real-time bias for EU-15 countries
Structural and cyclical effects of tax progression
Corporate marginal tax rate, tax loss carryforwards and investment functions: empirical analysis using a large German panel data set
Pro-cyclical capital regulation and lending
On-the-job search and the cyclical dynamics of the labor market
Methodology and technique for determining structural budget deficits
Who benefits from using property taxes to finance a labor tax wedge reduction?