Abstract:

Income tax (and income-tested benefit policies) fluctuate considerably over time, mainly driven by changes in governmental leadership. I then study the macroeconomic consequences of these fluctuations and the resulting fiscal uncertainty using a simple model of heterogeneous agents calibrated on French data. Aggregate tax uncertainty is introduced through a three-state stochastic process. This framework shows that income tax uncertainty generally generates recessive effects, as labor supply, output, and welfare decrease compared to a deterministic setup.

Location:

Room Malinvaud, CEPS University of Val d'Essonne
Boulevard François Mitterrand, 91025, Evry