The optimal flat-rate fiscal structure is calculated in a two-sector endogenous growth model of the Mexican economy. Government expenditures would be financed by an income tax rate. If capital and labor income can be taxed at distinct rates, the optimal tax rate on wages would be zero. Holding constant public expenditure parameters, the optimal tax rate on consumption is zero. The presence of externalities does not seem to justify as higher a subsidy to education as the one estimated. These results are relatively robust to parameter variations.
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Volume (Year): XIII (2004) Issue (Month): 2 (July-December) Pages: 161-189 Download reference. The following formats are available: HTML
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