208-2011-L8

208-2011-L8 - Econ 208 Marek Kapicka Lecture 8 Taxation...

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Unformatted text preview: Econ 208 Marek Kapicka Lecture 8 Taxation What To Do n Read n Today: DLS, Chapter 13.2,13.4 n Next Monday: 13.3, 14.1-14.2 Where are we? n Introduction: A model with no Government n The Effects of Government Spending n Government Taxation and Government Debt n Fiscal and Monetary Policy n Optimal Monetary Policy n Financial Intermediation n Current Account Determination n Fiscal Deficits and Current Account Today n Government Taxation n 1) The data n 2) The effects on Labor Supply n 3) The effects on Government Revenue n 4) The effects on GDP Data on US Taxation Federal Government Revenue Data on US Taxation Average Marginal Income Taxes Taxation n Lump-Sum tax vs. Distortive tax n Lump sum tax does not depend on the actions of the consumer n With distortive taxation, the welfare theorems fail n Competitive equilibrium is not Pareto optimal Why Distortive Taxation? n In reality, lump-sum tax is infeasible n Lump sum means everyone pays the same amount but some people have no wealth n If differences among people are taken into account then a distorting tax is the only possibility n What are the effects of a flat tax on n Labor Supply? n Government Revenue? n GDP? n Capital Accumulation? Optimal Labor Taxation: an Example n Utility of a household n Household problem: γ γ γ γ =- = < <- = , ln 1 , ) , ( L C L C L C U wL t C t s L C ) 1 ( . ....
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This note was uploaded on 12/26/2011 for the course ECON 208 taught by Professor Staff during the Fall '08 term at UCSB.

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208-2011-L8 - Econ 208 Marek Kapicka Lecture 8 Taxation...

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