Elastic Labour Supply and Optimal Taxation in a Model of Sustainable Endogenous Growth
AbstractThis paper presents an endogenous growth model which features elastic labour supply in order to address the distortions created by labour income and consumption taxation. Introducing elastic labour into an AK model greatly changes the structure of the model and raises problems regarding the existence and the stability of a balanced growth path. Another important feature of this paper is the presence of environmental quality both in the utility and in the production functions and the requirement that the growth path of the economy be environmentally sustainable. Within the framework outlined, the focus of the analysis is on optimal taxation and on the effects of government policy on the growth path of the economy. The basic result is that even in this simple setting the interaction between the economic and the ecological system are complex and the policy outcomes crucially depend on the parameters of the model.
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Bibliographic InfoPaper provided by Institute for Advanced Studies in its series Economics Series with number 105.
Length: 18 pages
Date of creation: Oct 2001
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Find related papers by JEL classification:
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
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