Public Investment when Capital is Back - Distributional Effects of Heterogeneous Saving Behavior

Arbeitspapier

We study the impact of heterogeneous saving behavior on the distributional effects of public investment. A capital tax is levied to finance productive public capital in an economy with two types of households: high income households who save dynastically and middle income households who save for retirement. We find that inequality is reduced the higher the capital tax rate and that low rates even constitute a Pareto-improvement. There is thus no clear-cut trade-off between efficiency and inequality: middle income households’ consumption is maximal at a higher capital tax rate than high income households’ consumption.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4714

Classification and Topics

• Classification: Wirtschaft ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Fiscal Policies and Behavior of Economic Agents: Household ; Publicly Provided Goods: General ; National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock
• Subject: public capital ; wealth disparity ; inequality ; household heterogeneity ; Pasinetti Paradox ; saving behavior

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mattauch, Linus ; Edenhofer, Ottmar ; Klenert, David ; Bénard, Sophie
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/96905
• Last update: 10.03.2025, 11:43 AM CET