Taxation in the Two-Sector Neoclassical Growth Model with Sector-Specific Externalities and Endogenous Labor Supply
AbstractThis paper examines the long-run impacts of selective (sector-specific) commodity, payroll and profit taxes in a two-sector endogenous growth model with sector-specific production externalities, in which one sector produces consumption goods and the other produces investment goods. The novelty of the model is that it allows not only for endogenous labor supply (which may lead to indeterminacy) but also for the intersectional allocation of labor. We analytically show that the long-run effects of these selective taxes are closely related to the possible emergence of the indeterminacy of equilibria, which may reverse the standard results of the growth effects of distortionary taxes.
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Bibliographic InfoPaper provided by Graduate School of Economics and Business Administration, Hokkaido University in its series Discussion paper series. A with number 225.
Length: 36 pages
Date of creation: Jun 2010
Date of revision:
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Selective tax; Two-sector model; Endogenous growth; Production externalities; Indeterminacy; Endogenous labor supply; H22; J22; O41;
Find related papers by JEL classification:
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- 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-2010-08-14 (All new papers)
- NEP-DGE-2010-08-14 (Dynamic General Equilibrium)
- NEP-FDG-2010-08-14 (Financial Development & Growth)
- NEP-PUB-2010-08-14 (Public Finance)
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