Tax Distortions in a Neoclassical Monetary Economy in the Presence of Administration Costs : Discussion Paper No 151
Lahiri, Radhika (2003) Tax Distortions in a Neoclassical Monetary Economy in the Presence of Administration Costs : Discussion Paper No 151. [Working Paper] (Unpublished)
This paper uses the neoclassical growth model to evaluate the size of distortions associated with different monetary and fiscal policies designed to finance government expenditures in the presence of administration costs. The model is calibrated to match important features of U.S. data, and used to evaluate welfare costs of monetary and fiscal policies. We find that the presence of administration costs increases the welfare costs of government policies involving different combinations of taxes on capital and labour income, consumption and money holdings. In addition, the welfare implications of tax reforms designed to replace the taxes on labor or capital income with less distorting forms of taxation are altered. Another implication of the results is that in economies with larger costs of administration, revenue replacement through seigniorage would be a more attractive option than other feasible forms of taxation.
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|Item Type:||Working Paper|
|Keywords:||Neoclassical Monetary Economy|
|Subjects:||Australian and New Zealand Standard Research Classification > ECONOMICS (140000)|
|Divisions:||Current > QUT Faculties and Divisions > QUT Business School|
|Copyright Owner:||Copyright 2003 (please consult author)|
|Deposited On:||16 Aug 2004|
|Last Modified:||05 Jan 2011 23:23|
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