Template-type: ReDIF-Paper 1.0
Author-Name: Alfonso Novales
Author-Email: anovales@ccee.ucm.es
Author-Person: pno7 
Author-Workplace-Name: Departamento de Economía Cuantitativa, Universidad Complutense de Madrid
Author-Workplace-Homepage: https://www.ucm.es/fundamentos-analisis-economico2/novales-cinca,-alfonso
Author-Name: Jesús Ruiz
Author-Workplace-Name: Departamento de Análisis e Historia Económica, Universidad Autónoma de Barcelona,
Title: Dynamic Laffer Curves
Abstract: In an endogenous growth model with human capital accumulation, we discuss the possibility of 
	welfare improving changes on the 1scal policy stance in some actual economies. First, we characterize 
	the extent to which the initial fall in revenues produced by a permanent tax cut can be compensated by 
	an increase in the tax base, due to a dynamic La#er curve efect, showing that there is, in fact, a 
	non-trivial margin for 	substituting debt for taxes on 	labor and capital income. Second, we show that 
	the largest feasible reduction in labor income tax rates may easily produce a higher welfare gain than 
	the largest feasible reduction in capital income tax rates.
	Two qualifications: (a) feasible tax cuts exist only for a relatively high elasticity of intertemporal 
	substitution of consumption, and (b) the preference for the largest feasible tax cut on labor income 
	rather than that on capital income reverses for a low appreciation for leisure, relative to consumption, 
	in the preferences of the representative agent.
Classification-JEL: E62; O41; H30
Keywords: Endogenous growth; Human capital accumulation; La#er e#ect
Length: 26 pages
Creation-Date: 2001
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae0106.txt
File-URL: https://eprints.ucm.es/id/eprint/6790/1/0106.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:0106