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Public capital, endogenous growth, and tax concession on savings

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  • Manash Ranjan Gupta

    (Indian Statistical Institute)

Abstract

An endogenous growth model is developed where, on one hand income tax revenue is utilized to finance investment on public capital, and on the other hand tax concession is given on savings. If one of the two instruments—proportional income tax rate and proportional tax-concession rate on savings—is used as the policy variable to maximize the balanced growth rate while the other is treated as a parameter, an exogenous increase in the value of the parameter raises the optimum value of the policy variable and generates a positive effect on endogenous growth rate as well as on the rate of savings in the steady-state equilibrium.

Suggested Citation

  • Manash Ranjan Gupta, 2020. "Public capital, endogenous growth, and tax concession on savings," Indian Economic Review, Springer, vol. 55(2), pages 199-223, December.
    • Handle: RePEc:spr:inecre:v:55:y:2020:i:2:d:10.1007_s41775-020-00099-x
    DOI: 10.1007/s41775-020-00099-x
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    References listed on IDEAS

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    More about this item

    Keywords

    Endogenous growth; Public capital; Steady-state equilibrium; Savings; Proportional; Lump sum; Income tax; Tax concession; Optimum;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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