Taxes And Capital Intensity In A Two-Class Disposable Income Growth-Model

Document Type


Publication Date


Published In

Journal Of Public Economics


By analyzing the incentive effects of taxes, previous studies may give the impression that the impact on capital intensity of converting an income tax to either a consumption or wage tax depends solely on the difference in such incentive effects on the representative person. This paper shows that tax conversion may also alter capital intensity by shifting disposable income from low to high savers. In a two-class, disposable income growth model that eliminates the incentive effects of taxes, converting an income tax to a wage or consumption tax that would raise equal steady-state revenue per worker would raise the steady-state capital intensity of the economy.

This document is currently not available here.