Tax Policy , the Macroeconomy , and Intergenerational Distribution

  title={Tax Policy , the Macroeconomy , and Intergenerational Distribution},
  author={BEN J. HEIJDRA and Jenny E. Ligthart},
The paper studies the dynamic macroeconomic and welfare effects of tax policy in the context of an overlapping-generations model of the Yaari-Blanchard type for a closed economy. The model is extended to allow for endogenous labor supply and three tax instruments—namely, a capital tax, labor income tax, and consumption tax. It is shown that labor taxes increase welfare of old generations whereas capital and consumption taxes reduce their welfare. [JEL D60, H23, H63]