Supply-side economics with AS-AD in Ramsey dynamic general equilibrium

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F67985998%3A_____%2F23%3A00576272" target="_blank" >RIV/67985998:_____/23:00576272 - isvavai.cz</a>

Výsledek na webu

<a href="https://doi.org/10.1016/j.eap.2023.08.020" target="_blank" >https://doi.org/10.1016/j.eap.2023.08.020</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1016/j.eap.2023.08.020" target="_blank" >10.1016/j.eap.2023.08.020</a>

Jazyk výsledku

angličtina

Název v původním jazyce

Supply-side economics with AS-AD in Ramsey dynamic general equilibrium

Popis výsledku v původním jazyce

The Ramsey dynamic general equilibrium (RDGE) model has been applied broadly within mainstream macroeconomic analysis. While the labor market of the RDGE model has long been developed, any consensus on the goods market has remained elusive. This has made supply-side policy analysis within it difficult since it is founded upon the premise of aggregate supply (AS) featuring more prominently than aggregate demand (AD). Specifying a relative price of output that makes the goods market consistent with the recursive structure of the RDGE paradigm, the paper then applies AS-AD quantitatively to study productivity increases and income tax rate decreases that have been a centerpiece in supply-side economics. The paper contributes how both a productivity increase and a capital income tax rate decrease cause a net shift out of AS relative to AD that lowers the relative price of output. It shows how productivity increases and tax rate reductions quantitatively increase macroeconomic variables. The increase in economic activity remains proportional to the percentage increase in productivity, giving rise to our introduction of the concept of a productivity multiplier. Tax rate reductions cause increased economic activity at a decreasing rate as the level of the tax rate decreases. The paper shows the sense in which capital income tax rate reductions quantitatively have larger magnitude effects on output, consumption, investment, and capital wealth, while labor income tax rate reductions have larger magnitude effects on employment. Tax revenue implications are also presented with the first Laffer curves linked to the RDGE AS-AD analysis. Limitations, extensions and policy applications are suggested.

Název v anglickém jazyce

Supply-side economics with AS-AD in Ramsey dynamic general equilibrium

Popis výsledku anglicky

The Ramsey dynamic general equilibrium (RDGE) model has been applied broadly within mainstream macroeconomic analysis. While the labor market of the RDGE model has long been developed, any consensus on the goods market has remained elusive. This has made supply-side policy analysis within it difficult since it is founded upon the premise of aggregate supply (AS) featuring more prominently than aggregate demand (AD). Specifying a relative price of output that makes the goods market consistent with the recursive structure of the RDGE paradigm, the paper then applies AS-AD quantitatively to study productivity increases and income tax rate decreases that have been a centerpiece in supply-side economics. The paper contributes how both a productivity increase and a capital income tax rate decrease cause a net shift out of AS relative to AD that lowers the relative price of output. It shows how productivity increases and tax rate reductions quantitatively increase macroeconomic variables. The increase in economic activity remains proportional to the percentage increase in productivity, giving rise to our introduction of the concept of a productivity multiplier. Tax rate reductions cause increased economic activity at a decreasing rate as the level of the tax rate decreases. The paper shows the sense in which capital income tax rate reductions quantitatively have larger magnitude effects on output, consumption, investment, and capital wealth, while labor income tax rate reductions have larger magnitude effects on employment. Tax revenue implications are also presented with the first Laffer curves linked to the RDGE AS-AD analysis. Limitations, extensions and policy applications are suggested.

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

50202 - Applied Economics, Econometrics

Projekt

—

Návaznosti

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Rok uplatnění

2023

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název periodika

Economic Analysis and Policy

ISSN

0313-5926

e-ISSN

0313-5926

Svazek periodika

80

Číslo periodika v rámci svazku

December

Stát vydavatele periodika

NL - Nizozemsko

Počet stran výsledku

27

Strana od-do

505-531

Kód UT WoS článku

001079833100001

EID výsledku v databázi Scopus

2-s2.0-85171372196