Aggregate instability under balanced-budget consumption taxes: A re-examination

• 成果类型: Article
• 署名作者: Nourry, Carine; Seegmuller, Thomas; Venditti, Alain
• 署名单位: Aix-Marseille Universite; Centre National de la Recherche Scientifique (CNRS); Institut Universitaire de France; Universite Catholique de Lille; EDHEC Business School
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2013.07.010
• 发表日期: 2013
• 页码: 1977-2006
• 关键词: Indeterminacy; Endogenous business cycles; consumption taxes; Income effect; Balanced-budget rule; Infinite-horizon model

摘要

We re-examine the destabilizing role of balanced-budget fiscal policy rules based on consumption taxation. Using a one-sector model with infinitely-lived households, we consider a specification of preferences derived from Jaimovich (2008) [14] and Jaimovich and Rebelo (2009) [15] which is flexible enough to encompass varying degrees of income effect. When the income effect is not too large, we show that there exists a Laffer curve, which explains the multiplicity of steady states, and that non-linear consumption taxation may destabilize the economy, promoting expectation-driven fluctuations, if the elasticity of intertemporal substitution in consumption is sufficiently larger than one and the tax rate is counter-cyclical with respect to consumption. Numerical illustrations also show that consumption taxation may be a source of instability for most OECD countries for a wide range of structural parameters' configurations. We finally prove the robustness of our conclusions if we consider a discrete-time setup. (C) 2013 Elsevier Inc. All rights reserved.