Factor income taxation, growth, and investment specific technological change
AbstractWe construct a tractable endogenous growth model with production externalities in which the public capital stock augments investment speci?c technological change. We characterize the ?rst best ?scal policy and show that there exist several labor and capital tax-subsidy combinations that decentralize the planner?s growth rate. The optimal factor income tax mix is therefore indeterminate which gives the planner the flexibility to choose policy rules from a large set. Our model explains why many advanced economies experiencing similar growth rates have widely varying factor income tax rates.
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Bibliographic InfoPaper provided by Indian Statistical Institute, New Delhi, India in its series Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers with number 13-04.
Length: 50 pages
Date of creation: Jan 2013
Date of revision:
Investment Specific Technological Change; Endogenous Growth; Factor Income Taxation; Welfare; First best fiscal policy; Indeterminacy;
Find related papers by JEL classification:
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-22 (All new papers)
- NEP-DGE-2013-11-22 (Dynamic General Equilibrium)
- NEP-FDG-2013-11-22 (Financial Development & Growth)
- NEP-MAC-2013-11-22 (Macroeconomics)
- NEP-PBE-2013-11-22 (Public Economics)
- NEP-PUB-2013-11-22 (Public Finance)
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