Externalities, income taxes and indeterminacy in OLG models

Using an aggregate two-periods overlapping generations model with endogenous labor, consumption in both periods of life, homothetic preferences and productive external effects [Lloyd-Braga et al., 2007. Indeterminacy in dynamic models: When Diamond meets Ramsey. Journal of Economic Theory 134, 513-536], we examine the effects of alternative government financing methods on the range of values of increasing returns leading to indeterminacy. We show that under a large enough share of first period consumption over the wage income, local indeterminacy can easily occur for mild externalities if constant government expenditure is financed through either labor or capital income taxes. More precisely, we show that, with labor income taxes and mild externalities, small government expenditures are helpful to local indeterminacy, while large government expenditures are useful to stabilize the economy. With capital income taxes and mild externalities, local indeterminacy always exists. Moreover, we explore how our previous results are changed once government expenditure is endogenously determined for fixed rates on labor and capital income under the balanced-budget rule.Indeterminacy; Endogenous income tax rates; Externalities.

Are Progressive Income Taxes Stabilizing? : A Reply

Dromel and Pintus [Are Progressive Income Taxes Stabilizing?, Journal of Public Economic Theory 10, (2008) 329-349] have shown that labor-income tax progressivity reduces the likelihood of local indeterminacy, sunspots and cycles in a one sector monetary economy with constant returns to scale. In this note, we extend Dromel and Pintus (2008) into a two sector monetary economy with constant returns to scale studied by Bosi et al. (2007) and reassess the stabilizing effect of progressive income taxes. We show that the result in Dromel and Pintus (2008) is robust to this extension, which means that changes of the production structure won't affect the stabilizing effect of progressive income taxes, i.e., tax progressivity (regressivity) reduces (increases) the likelihood of local indeterminacy, sunspots and cycles.Tax Progressivity, local indeterminacy

Endogenous income taxes in OLG economies: A clarification

This paper introduces endogenous capital income tax rates as in Schmitt-Grohe and Uribe (1997), into the overlapping generations model with endogenous labor and consumption in both periods of life (e.g., Cazzavillan and Pintus, 2004). In contrast with the previous result that the existence of endogenous labor income taxes raises the possibility of local indeterminacy (Chen and Zhang 2009), it shows that increasing the size of capital income taxes can make shrink the range of values of the consumption--to--wage ratio associated with local indeterminacy, because of two conflicting effects on savings that operate through wage and interest rate.Indeterminacy; Endogenous capital income tax rate.

Endogenous income taxes and indeterminacy in dynamic models: When Diamond meets Ramsey again.

This paper introduces fiscal increasing returns, through endogenous labor income tax rates as in Schmitt-Grohe and Uribe (1997), into the overlapping generations model with endogenous labor, consumption in both periods of life and homothetic preferences (e.g., Lloyd-Braga, Nourry and Venditti, 2007). We show that under numerical calibrations of the parameters, local indeterminacy can occur for distortionary tax rates that are empirically plausible for the U.S. economy, provided that the elasticity of capital-labor substitution and the wage elasticity of the labor supply are large enough, and the elasticity of intertemporal substitution in consumption is slightly greater than unity. These indeterminacy conditions are similar to those obtained within infinite horizon models and from this point of view, Diamond meets Ramsey again.Indeterminacy; Endogenous labor income tax rate.

The Berry curvature dipole in Weyl semimetal materials: an ab initio study

Noncentrosymmetric metals are anticipated to exhibit a $dc$ photocurrent in the nonlinear optical response caused by the Berry curvature dipole in momentum space. Weyl semimetals (WSMs) are expected to be excellent candidates for observing these nonlinear effects because they carry a large Berry curvature concentrated in small regions, i.e., near the Weyl points. We have implemented the semiclassical Berry curvature dipole formalism into an $ab~initio$ scheme and investigated the second-order nonlinear response for two representative groups of materials: the TaAs-family type-I WSMs and MoTe$_2$-family type-II WSMs. Both types of WSMs exhibited a Berry curvature dipole, in which type-II Weyl points are usually superior to the type-I because of the strong tilt. Corresponding nonlinear susceptibilities in several materials promise a nonlinear Hall effect in the $dc$ field limit, which is within the experimentally detectable range.Comment: 6 pages, 4 figures and 1 tabl

Dynamic effects of government expenditure in a finance constrained economy: A Note

Gokan [Dynamic effects of government expenditure in a finance constrained economy, J. Econ. Theory 127 (2006) 323-333] introduces constant government expenditure (financed by labor income taxes) in Woodford's model with capital-labor substitution and investigates how local dynamics near two steady states depend upon the elasticity of substitution between capital and labor. In this paper, we show that the local dynamics will change dramatically if the government transfers its revenue to the households (workers) in a lump sum way. In particular, we question the result that the rate of money growth has no impact on the model dynamics. In a numerical example, we illustrate that the result previously obtained is not robust to the alternative assumption.a lump sum transfer; indeterminacy.