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On Capital-Income Taxes and Wages

Summary:
Greg Mankiw offers a simple example to establish that a reduction in the tax rate on capital income (in a closed economy) raises wages in the long run. John Cochrane patiently typed the solution. And Larry Summers argues on his blog that US realities are not well captured by Mankiw’s example.

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Greg Mankiw offers a simple example to establish that a reduction in the tax rate on capital income (in a closed economy) raises wages in the long run. John Cochrane patiently typed the solution. And Larry Summers argues on his blog that US realities are not well captured by Mankiw’s example.

Dirk Niepelt
Dirk Niepelt is Director of the Study Center Gerzensee and Professor at the University of Bern. A research fellow at the Centre for Economic Policy Research (CEPR, London), CESifo (Munich) research network member and member of the macroeconomic committee of the Verein für Socialpolitik, he served on the board of the Swiss Society of Economics and Statistics and was an invited professor at the University of Lausanne as well as a visiting professor at the Institute for International Economic Studies (IIES) at Stockholm University.

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