Progressive Taxation, Public Capital, and Endogenous Growth
AbstractThis paper presents and analyzes an endogenous growth model with public capital and progressive taxation. Two versions are considered: The first version assumes that the budget of the government is balanced at each point of time. The second allows for public debt but asserts that the ratio of the primary surplus to gross domestic income is a positive linear function of the debt/income ratio, which guarantees that public debt is sustainable. The paper then derives necessary conditions for the existence of a sustainable balanced growth path for the analytical model. Further, simulations are undertaken in order to gain insight into growth effects of varying the slope of the tax schedule and in order to find how the tax scheme affects the dynamics of the model.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 62 (2006)
Issue (Month): 3 (September)
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Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
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- Lai, Ching-Chong & Liao, Chih-Hsing, 2012. "Optimal nonlinear income taxation with productive government expenditure," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 66-77.
- Jang-Ting Guo & Shu-Hua Chen, 2013. "Progressive Taxation and Macroeconomic (In)stability with Utility-Generating Government Spending," Working Papers 201302, University of California at Riverside, Department of Economics, revised Apr 2013.
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