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Government Spending, Local Indeterminacy and Tax Structure

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  • Xavier Raurich

Abstract

This paper develops an endogenous growth model where sustained growth is due to the introduction of a public input. Consumers derive utility from consumption, leisure and a public good. The public input and the public good are the flow of government expenditures. These expenditures are financed by means of income taxes. With these assumptions, it is shown that the dynamic equilibrium may exhibit local indeterminacy when the tax rate on the labour income is large. The tax structure that maximizes growth and the optimal tax structure are characterized and compared. Copyright (c) The London School of Economics and Political Science 2003.

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 70 (2003)
Issue (Month): 280 (November)
Pages: 639-653

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Handle: RePEc:bla:econom:v:70:y:2003:i:280:p:639-653

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Cited by:
  1. Andreas Irmen & Johanna Kühnel, 2008. "Productive Government Expenditure and Economic Growth," Working Papers 0464, University of Heidelberg, Department of Economics, revised May 2008.
  2. Benos, Nikos, 2009. "Fiscal policy and economic growth: empirical evidence from EU countries," MPRA Paper 19174, University Library of Munich, Germany.

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