The Friedman rule in an overlapping-generations model with nonlinear taxation and income misreporting

• 成果类型: Article
• 署名作者: Gahvari, Firouz; Micheletto, Luca
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign; University of Milan; Uppsala University; Leibniz Association; Ifo Institut
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2014.06.015
• 发表日期: 2014
• 页码: 10-23
• 关键词: The Friedman rule; Tax evasion; Overlapping-generations; Second best; monetary policy; fiscal policy; redistribution

摘要

This paper models a two-period overlapping-generations economy with money populated with individuals of different skills. They face a nonlinear income tax schedule and can engage in tax evasion. Money serves two purposes: the traditional one, modeled through a money-in-the-utility-function; it also facilitates tax evasion. The main message of the paper is that income tax evasion in this framework leads to the violation of the Friedman rule. The paper also shows that even in the absence of tax evasion, when optimality requires differential commodity taxation, complementarity of real cash balances and labor supply does not guarantee the optimality of the Friedman rule as a boundary solution. An additional assumption is required. (C) 2014 Elsevier B.V. All rights reserved.