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Destabilizing balanced-budget consumption taxes in multi-sector economies

Abstract : We examine the impact of balanced-budget consumption taxes on the existence of expectations-driven business cycles in two-sector economies with infinitely-lived households. We prove that, whatever the relative capital intensity difference across sectors, aggregate instability can occur if the consumption tax rate is not too low. Moreover, we show through a numerical exercise based on empirically plausible tax rates that endogenous business-cycle fluctuations may be a source of instability for all OECD countries, including the US.
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Contributor : Elisabeth Lhuillier Connect in order to contact the contributor
Submitted on : Monday, April 3, 2017 - 5:13:02 PM
Last modification on : Thursday, November 4, 2021 - 11:58:07 AM


  • HAL Id : hal-01500876, version 1



Kazuo Nishimura, Carine Nourry, Thomas Seegmuller, Alain Venditti. Destabilizing balanced-budget consumption taxes in multi-sector economies. International Journal of Economic Theory, Wiley, 2013, 9 (1), pp.113-130. ⟨hal-01500876⟩



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