Optimal taxation, critical-level utilitarianism and economic growth

We analyze tax policies in an intertemporal economy with endogenous fertility under critical-level utilitarianism, both from a positive and a normative standpoint. On the positive side, we analyze the effects of a change in the tax on capital income and on fertility, both separately and combined so as to keep the per-capita public debt constant. On the normative side, we characterize the first- and second-best optimal tax structures, for both exogenous and endogenous labor supply.

►We analyze positive and normative taxation under critical-level utilitarianism. ►The effects of tax reforms on consumption, capital, and fertility are shown. ►First- and second-best optimal tax structures are derived.