On the Analytics of the Dynamic Laffer Curve
AbstractIn this paper, we analyze government budget balance within a simple model of endogenous growth. For the AK model, simple analytical conditions for a tax cut to be self-financing can be derived. The critical variable is not the tax rate per se, but the "transfer-adjusted tax rate". We discuss some conceptual issues in dynamic revenue analysis, and we explain why previous studies have arrived at seemingly contradictory results. Finally, we perform an empirical study of the transfer-adjusted tax rates of the OECD countries to see which country has the highest potential for fiscal improvements; it turns out that only a few countries have any potential for such "dynamic scoring".
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Bibliographic InfoPaper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2000:5.
Length: 25 pages
Date of creation: 02 May 2000
Date of revision:
Publication status: Published in Journal of Monetary Economics, 2001, pages 397-414.
Contact details of provider:
Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
More information through EDIRC
Laffer effects; intertemporal models; dynamic scoring; growth models;
Other versions of this item:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-05-08 (All new papers)
- NEP-DEV-2000-05-08 (Development)
- NEP-DGE-2000-05-08 (Dynamic General Equilibrium)
- NEP-PUB-2000-05-08 (Public Finance)
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