Document de travail

The Horizontally s-shaped laffer curve

Patrick Fève, Julien Matheron et Jean-Guillaume Sahuc

Résumé

In a neoclassical growth model with incomplete markets and heterogeneous, liquidity-constrained agents, the properties of the Laffer curve depend on whether debt or transfers are adjusted to balance the government budget constraint. The Laffer curve conditional on public debt is horizontally S-shaped. Two opposing forces explain this result. First, when government wealth increases, the fiscal burden declines, calling for lower tax rates. Second, because the interest rate decreases when government wealth increases, fiscal revenues may also decline, calling for higher taxes. For sufficiently negative government debt, the second force dominates, leading to the odd shape of the Laffer curve conditional on debt.

Mots-clés

Laffer Curve; Incomplete Markets; Labor Supply; Public Debt;

Codes JEL

  • E00: General
  • E60: General

Remplacé par

Patrick Fève, Julien Matheron et Jean-Guillaume Sahuc, « The Horizontally s-shaped laffer curve », Journal of the European Economic Association, vol. 16, n° 3, juin 2018, p. 857–893.

Référence

Patrick Fève, Julien Matheron et Jean-Guillaume Sahuc, « The Horizontally s-shaped laffer curve », TSE Working Paper, n° 17-774, mars 2017.

Voir aussi

Publié dans

TSE Working Paper, n° 17-774, mars 2017