On growth-optimal tax rates and the issue of wealth inequalities

DOI10.1088/1742-5468/2015/11/P11011zbMATH Open1456.91062arXiv1508.00275OpenAlexW3125222256MaRDI QIDQ3302145FDOQ3302145

Authors: Jean-Philippe Bouchaud 

Publication date: 11 August 2020

Published in: Journal of Statistical Mechanics: Theory and Experiment (Search for Journal in Brave)

Abstract: We introduce a highly stylized, yet non trivial model of the economy, with a public and private sector coupled through a wealth tax and a redistribution policy. The model can be fully solved analytically, and allows one to address the question of optimal taxation and of wealth inequalities. We find that according to the assumption made on the relative performance of public and private sectors, three situations are possible. Not surprisingly, the optimal wealth tax rate is either 0% for a deeply dysfunctional government and/or highly productive private sector, or 100 % for a highly efficient public sector and/or debilitated/risk averse private investors. If the gap between the public/private performance is moderate, there is an optimal positive wealth tax rate maximizing economic growth, even -- counter-intuitively -- when the private sector generates more growth. The compromise between profitable private investments and taxation however leads to a residual level of inequalities. The mechanism leading to an optimal growth rate is related the well-known explore/exploit trade-off.

Full work available at URL: https://arxiv.org/abs/1508.00275

Recommendations

• Zero Expected Wealth Taxes: A Mirrlees Approach to Dynamic Optimal Taxation
• Kinetic models for optimal control of wealth inequalities
• Publication:4944306
• Redistribution and entrepreneurship with Schumpeterian growth
• Optimal taxation in national economies. Net income entropy, weighted incomes-inequalities and fuzzy saving propensities

Mathematics Subject Classification ID

Macroeconomic theory (monetary models, models of taxation) (91B64) Applications of statistical and quantum mechanics to economics (econophysics) (91B80)

Cites Work

• The distribution of wealth and fiscal policy in economies with finitely lived agents
• Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives
• Random-energy model: an exactly solvable model of disordered systems
• Effects of network topology on wealth distributions
• Basic kinetic wealth-exchange models: common features and open problems
• Evolution of the distribution of wealth in an economic environment driven by local Nash equilibria
• World distribution of Gross domestic product per-capita

Cited In (8)

• Correlation and relaxation times for a stochastic process with a fat-tailed steady-state distribution
• On absence of steady state in the Bouchaud-Mézard network model
• Use It or Lose It: Efficiency and Redistributional Effects of Wealth Taxation
• Localization phase transition in stochastic dynamics on networks with hub topology
• Evolution of cooperation in networked heterogeneous fluctuating environments
• The advantage of capitalism vs. socialism depends on the criterion
• Sharing and growth in general random multiplicative environments
• Title not available (Why is that?)

This page was built for publication: On growth-optimal tax rates and the issue of wealth inequalities

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q3302145)