Mathias Trabandt, European Central Bank, and Harald Uhlig, University of Chicago and NBER, "How do Laffer Curves
Differ Across Countries?
The aggregate (macro) Laffer curve is a vertical summation of the individualistic Laffer curves of all heterogeneous individuals in the society (in terms of hourly wage rate) at each tax rate.
Based on these three assumptions, we show that even if the individualistic Laffer curves are one-peaked, the aggregate Laffer curve may be (and based on U.
Finally after deriving the micro Laffer curves of individuals who differ in their wage rate and demonstrating how the multi-peaked aggregate macro Laffer curve is derived, we devote the last section to a discussion of some possible implications and conclusions.
The transformation from the individual curve to the aggregate Laffer curve does not lead necessarily to the same shape, and under certain conditions (conditions that appear to hold in many Western countries) it is more likely that the vertical summation of individualistic Laffer curves of different individuals will generate a curve with dual, multiple and even continuous regions of peak values of tax revenue.
8) Guesnerie and Jerison (1991) show for general demand functions and technologies that Laffer curves can have many shapes.
Which of the three Laffer curves in Chart 3 is the correct one for the 1980s under the Reagan administration?
However, it must be noted that the strong assumptions on the form of the utility and production functions may limit the shape of the associated Laffer curves.
Figure 6 shows a more comprehensive version of the isorevenue curves that includes the backward-bending portion of the Laffer curves.
Under the assumption that the governments' objectives are leviathan revenue maximization, she demonstrates that when two governments are allowed to tax the same good, the combined tax rate will lie on the backward-bending portion of the Laffer curve.
If only one government taxes a particular tax base, it could maximize tax revenue by setting a tax rate corresponding to the point at the peak of the Laffer curve.
Just as Professor Naqvi shows great admiration for the welfare implications of Rawls' concepts, he shows contempt for three main lines of thought in modern economics, namely, rational expectations, Friedmanite monetarism, and Laffer curves