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Testing for tax smoothing in a general equilibrium model of growth

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  • Malley, Jim
  • Philippopoulos, Apostolis
  • Economides, George

Abstract

This paper constructs and formally tests a general equilibrium model of long-term growth and endogenous fiscal policy. In this model policymakers find it optimal to keep the income tax rate constant over time. Tax revenues finance public consumption and public production services, with the latter generating long-term growth. Surprisingly, despite its popularity amongst theorists, there have thus far been no formal econometric tests of this Barro-type general equilibrium model. We find that data from 22 OECD economies uniformly reject this model over the period 1960- 1996.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 18 (2002)
Issue (Month): 2 (June)
Pages: 301-315

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Handle: RePEc:eee:poleco:v:18:y:2002:i:2:p:301-315

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Web page: http://www.elsevier.com/locate/inca/505544

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Cited by:
  1. Alfonso Novales & Rafaela Pérez & Jesús Rúiz, 2013. "Optimal time-consistent fiscal policy in an endogenous growth economy with public consumption and capital," Documentos de Trabajo del ICAE 2013-23, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
  2. Jim Malley & Apostolis Philippopoulos, 2000. "Economic Growth and Endogenous Fiscal Policy: In Search of a Data Consistent General Equilibrium Model," CESifo Working Paper Series 235, CESifo Group Munich.
  3. Alfonso Novales & Rafaela Pérez & Jesús Rúiz, 2013. "Optimal time-consistent fiscal policy under endogenous growth with elastic labour supply," Documentos de Trabajo del ICAE 2013-24, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.

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