Generational Policy and the Macroeconomic Measurement of Tax Incidence

FRB of St. Louis Working Paper No. 2009-003A

35 Pages Posted: 29 Jan 2009

See all articles by Juan Carlos Conesa

Juan Carlos Conesa

University of Barcelona

Carlos Garriga

Federal Reserve Banks - Research Division

Date Written: January 28, 2009

Abstract

In this paper we show that the generational accounting framework used in macroeconomics to measure tax incidence can, in some cases, yield inaccurate measurements of the tax burden across age cohorts. This result is very important for policy evaluation, because it shows that the selection of tax policies designed to change generational imbalances could be misleading. We illustrate this problem in the context of a Social Security reform where we show how fiscal policy can affect the intergenerational gap across cohorts without impacting the distribution of welfare. We provide a more accurate procedure that only measures changes in generational imbalances derived from policies with real effects.

Keywords: Generational Accounting, Ramsey Taxation

JEL Classification: E62, H21

Suggested Citation

Conesa, Juan Carlos and Garriga, Carlos, Generational Policy and the Macroeconomic Measurement of Tax Incidence (January 28, 2009). FRB of St. Louis Working Paper No. 2009-003A, Available at SSRN: https://ssrn.com/abstract=1334197 or http://dx.doi.org/10.2139/ssrn.1334197

Juan Carlos Conesa

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

Carlos Garriga (Contact Author)

Federal Reserve Banks - Research Division ( email )

P.O. Box 442
St. Louis, MO 63166-0442
United States
(314) 444-7412 (Phone)
(314) 444-8731 (Fax)

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