Ricardo and the origin of dynamic tax analysis

This study reveals that dynamic equilibrium is uniquely determined after taxation, regardless of whether taxes fall on wages or profits in the short term. Casarosa argues that David Ricardo was aware of the effects of taxes on the dynamic equilibrium; however, Casarosa’s analysis is insufficient because his model mainly corresponds to an economy without taxation. By contrast, we arrange Ricardo’s argument regarding dynamic tax analysis from Chapter 16 of Principles and mathematically reconstruct it by applying a Casarosa model. This study argues that the origin of dynamic tax analysis in the Ricardian system is found in Ricardo on taxation.