Answers are grounded in this paper and cite their sources.
The welfare gain of a shift from capital to a labor income tax is determined in a model of intertemporal optimization with infinite horizon and variable labor supply. The welfare impact of small tax changes is computed by an approximation method around the steady state. When the difference between the growth rate and the discount rate is small, the welfare impact of tax reform depends mainly on the parameters of the production function.
No takes yet. Share an insight, caveat, or question.
Christophe Chamley (1985) studied this question.
Synapse has enriched 10 related papers. Consider them for comparative context: