Business Cycle Dynamics of a New Keynesian Overlapping Generations Model with Progressive Income Taxation

42 Pages Posted: 5 Apr 2006

See all articles by Burkhard Heer

Burkhard Heer

University of Augsburg; CESifo (Center for Economic Studies and Ifo Institute)

Alfred Maussner

University of Augsburg - Faculty of Business and Economics

Date Written: March 2006

Abstract

In our dynamic optimizing sticky price model, agents are heterogeneous with regard to their age and their productivity. We find that the business cycle dynamics in the OLG model in response to both a technology shock and a monetary shock are similar, but not completely identical to those found in the corresponding representative-agent model. In particular, working hours in the OLG model decrease in response to a positive technological shock, since for young workers the income effect dominates the substitution effect. This is in line with the adverse effect of productivity shocks on employment found in structural vector autoregressions.

Keywords: fluctuations, unanticipated inflation, wealth distribution, income distribution, progressive income taxation, Calvo price staggering

JEL Classification: E31, E32, E52, D31, D58

Suggested Citation

Heer, Burkhard and Maussner, Alfred, Business Cycle Dynamics of a New Keynesian Overlapping Generations Model with Progressive Income Taxation (March 2006). CESifo Working Paper Series No. 1692. Available at SSRN: https://ssrn.com/abstract=895042

Burkhard Heer (Contact Author)

University of Augsburg ( email )

Universitätsstr. 2
Augsburg, 86159
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Alfred Maussner

University of Augsburg - Faculty of Business and Economics ( email )

Universitaetsstr. 16
86135 Augsburg
Germany
+49 821 598 4187 (Phone)
+49 821 598 4231 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
160
Abstract Views
1,007
rank
186,758
PlumX Metrics