NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Balint Szoke

Department of Economics
New York University
19 West 4th Street, 6th Floor
New York, NY 10012

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Institutional Affiliation: New York University

NBER Working Papers and Publications

May 2019Optimal Positive Capital Taxes at Interior Steady States
with Jess Benhabib: w25895
We generalize recent results of Bassetto and Benhabib (2006) and Straub and Werning (2018) in a neo-classical model with endogenous labor-leisure choice where all agents are allowed to save and accumulate capital. We provide a sufficient condition under which optimal redistributive capital taxes remain at their allowed upper bound forever, even if the resulting equilibrium trajectory converges to a unique steady state with positive and finite consumption, capital, and labor. We then provide an interpretation of our sufficient condition. Using recent evidence on wealth distribution in the United States, we argue that our sufficient condition is empirically plausible.
 
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