KDI Journal of Economic Policy

Korea Development Institute (한국개발연구원)
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The Intergenerational Effects of Tax Policy in an Overlapping Generations Model with Housing Assets

  • Received : 2018.02.02
  • Published : 2018.05.30
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Abstract

Using an overlapping generations model, this paper examines tax policy effects across generations. The model incorporates housing assets separately from capital assets and includes taxes on labor income, capital income, consumption and housing assets. Tax reforms for each tax rate have different effects on tax burdens across generations and the overall efficiency of the economy, leading to different welfare costs for generations. Specifically, raising housing property taxes results in the smallest welfare loss by future generations, as in the model it does not hurt economic efficiency and the tax burden increases mainly for the elderly, who have accumulated housing assets in preparation for retirement.

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