Flat-Rate Taxes, Government Spending on Education, and Growth
AbstractWe address three questions in this paper. First, what is the impact on growth of changes in flat-rate taxes when government spending on education affects private decisions to accumulate human capital? Second, are the growth effects negligible when we simultaneously change taxes and government spending on education? Third, what are the implications for time allocated to learning when we change taxes and spending? For an economy calibrated to the U.S. data along the lines of Lucas (1990), we find that the growth effects of changes in capital income tax rates are negligible despite the distortionary government spending; simultaneous changes in taxes and spending on education have modest effects on growth; and the learning time is unresponsive to changes in taxes. While the first two results are consistent with the U.S. data, the third one is not: during the 20th century, the learning time has increased dramatically along with taxes. (Copyright: Elsevier)
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Bibliographic InfoArticle provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.
Volume (Year): 1 (1998)
Issue (Month): 1 (January)
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Find related papers by JEL classification:
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
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