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Joint Production of Goods and Knowledge: Implications for Tax Reform

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  • Carlo Perroni

Abstract

This paper examines the welfare impacts of tax reformin the context of a perfect-foresight two-sector model with linearendogenous growth, where new knowledge is a byproduct of productionactivities. A calibrated version of this model is used to obtainnumerical estimates of the welfare impact of equal-yield unanticipatedtax changes through transitional analysis. Simulation resultsindicate that the size of the welfare effects of income tax reformdepends crucially on the sectoral composition of final consumptionand investment demand, and on the interplay between output complementaritylinkages and factor intensities. Copyright Kluwer Academic Publishers 1997

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File URL: http://hdl.handle.net/10.1023/A:1008638320437
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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 4 (1997)
Issue (Month): 2 (May)
Pages: 149-165

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Handle: RePEc:kap:itaxpf:v:4:y:1997:i:2:p:149-165

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: Optimal Taxation; Growth;

References

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  1. King, R.G. & Rebelo, S., 1988. "Public Policy And Economic Growth: Developing Neoclassical Implications," RCER Working Papers 225, University of Rochester - Center for Economic Research (RCER).
  2. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  3. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  4. Stokey, Nancy L & Rebelo, Sergio, 1995. "Growth Effects of Flat-Rate Taxes," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 519-50, June.
  5. Alan J. Auerbach & Laurence J. Kotlikoff & Jonathan Skinner, 1983. "The Efficiency Gains from Dynamic Tax Reform," NBER Working Papers 0819, National Bureau of Economic Research, Inc.
  6. Sala-I-Martin, X. & Barro, R.J., 1991. "Public Finance in Models of Economic Growth," Papers 640, Yale - Economic Growth Center.
  7. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  8. Michael J. Boskin, 1975. "Notes on the Tax Treatment of Human Capital," NBER Working Papers 0116, National Bureau of Economic Research, Inc.
  9. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May.
  10. Perroni, Carlo, 1995. "Assessing the Dynamic Efficiency Gains of Tax Reform When Human Capital Is Endogenous," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 907-25, November.
  11. Harvey S. Rosen, 1982. "Taxation and On-the-job Training Decisions," NBER Working Papers 0733, National Bureau of Economic Research, Inc.
  12. Nerlove, Marc & Razin, Assaf & Sadka, Efraim & von Weizsacker, Robert K., 1993. "Comprehensive income taxation, investments in human and physical capital, and productivity," Journal of Public Economics, Elsevier, vol. 50(3), pages 397-406, March.
  13. Michael B. Devereux & David R. F. Love, 1994. "The Effects of Factor Taxation in a Two-Sector Model of Endogenous Growth," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 509-36, August.
  14. Pecorino, Paul, 1994. "The Growth Rate Effects of Tax Reform," Oxford Economic Papers, Oxford University Press, vol. 46(3), pages 492-501, July.
  15. repec:fth:prinin:151 is not listed on IDEAS
  16. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
  17. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
  18. Holtmann, A G, 1971. "Joint Products and On-the-Job Training," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 929-31, July-Aug..
  19. Davies, James & Whalley, John & Hamilton, Bob, 1989. "Capital income taxation in a two-commodity life cycle model : The role of factor intensity and asset capitalization effects," Journal of Public Economics, Elsevier, vol. 39(1), pages 109-126, June.
  20. Pecorino, Paul, 1993. "Tax structure and growth in a model with human capital," Journal of Public Economics, Elsevier, vol. 52(2), pages 251-271, September.
  21. Summers, Lawrence H, 1981. "Capital Taxation and Accumulation in a Life Cycle Growth Model," American Economic Review, American Economic Association, vol. 71(4), pages 533-44, September.
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Cited by:
  1. Theo Eicher & Stephen Turnovsky & Maria Carme Riera i Prunera, 2003. "Effects of differential taxation on factor accumulation and growth," Working Papers in Economics 98, Universitat de Barcelona. Espai de Recerca en Economia.
  2. Trostel, P. & Walker, I., 2000. "Education and Work," The Warwick Economics Research Paper Series (TWERPS) 554, University of Warwick, Department of Economics.

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