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Optimal nonlinear income taxation with productive government expenditure

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  • Lai, Ching-Chong
  • Liao, Chih-Hsing

Abstract

This paper develops an endogenous growth model with a production externality and nonlinear income taxation, and uses it to examine how the fiscal authority devises its nonlinear tax structure from the viewpoint of welfare maximization. It is found that, in the Barro (1990) model, Pareto optimality can be achieved if both policy instruments for the tax scalar and the extent of the tax progressivity/regressivity are set optimally.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 22 (2012)
Issue (Month): 1 ()
Pages: 66-77

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Handle: RePEc:eee:reveco:v:22:y:2012:i:1:p:66-77

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Web page: http://www.elsevier.com/locate/inca/620165

Related research

Keywords: Nonlinear income taxation; Optimal taxation; Endogenous growth;

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Cited by:
  1. Park, Hyun, 2013. "Do habits generate endogenous fluctuations in a growing economy?," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 54-68.

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