Tax Disturbances and Real Economic Activity in the Postwar United States Público Deposited

Creator Series Issue number
  • 506
Date Created
  • 1992-11
  • This paper investigates the macroeconomic effects of cyclical fluctuations in marginal tax rates. It finds that systematically including tax variables in a standard real business cycle model substantially improves the model's ability to reproduce basic facts about postwar U.S. business cycle fluctuations. In particular, modeling fluctuations in personal and corporate income tax rates increases the model's predicted relative variability of hours and decreases its predicted correlation between hours and average productivity. Fluctuations in tax rates produce large substitution effects that alter the leisure/labor supply decision.

Subject (JEL) Palabra Clave Date Modified
  • 08/30/2019
Corporate Author
  • Federal Reserve Bank of Minneapolis. Research Department
  • Federal Reserve Bank of Minneapolis
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