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Capital Taxation, Growth, and Non-renewable Resources

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Author Info
Christian Groth (Institute of Economics, University of Copenhagen)
Poul Schou (Danish Rational Economic Agents Model (DREAM))

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Abstract

The conventional view within the endogenous growth literature is that interest income taxes impede economic growth and investment subsidies promote economic growth. The present paper lays out a simple framework to see whether this is still true when non-renewable resources enter the ”growth engine” in an essential way. It is not! The framework allows a rich set of determinants of longrun growth, including some fiscal policy measures, but interest income taxes and investment subsidies are not among these. The results not only contrast with the modern literature on taxes and endogenous growth, but also with observations in the literature from the 1970’s on non-renewable resources and taxation - observations which were not based on general equilibrium considerations.

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Publisher Info
Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 04-16.

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Length: 29 pages
Date of creation: Jul 2004
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Handle: RePEc:kud:epruwp:04-16

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Related research
Keywords: non-renewable resources; endogenous growth; greenhouse effect; taxes; subsidies;

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Find related papers by JEL classification:
H2 - Public Economics - - Taxation, Subsidies, and Revenue
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  7. Stokey, Nancy L & Rebelo, Sergio, 1995. "Growth Effects of Flat-Rate Taxes," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 519-50, June. [Downloadable!] (restricted)
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  8. Christian Groth & Poul Schou, 2002. "Can non-renewable resources alleviate the knife-edge character of endogenous growth?," Oxford Economic Papers, Oxford University Press, vol. 54(3), pages 386-411, July.
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  10. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June. [Downloadable!] (restricted)
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  13. Robert J. Barro & Paul Romer, 1993. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr93-1.
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    • Robert J. Barro & Paul M. Romer, 1991. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr91-1.
  14. Milesi-Ferretti, Gian Maria & Roubini, Nouriel, 1998. "Growth Effects of Income and Consumption Taxes," CEPR Discussion Papers 1979, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  15. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Francisco J. André & Emilio Cerdá, 2004. "On natural resource substitution," Economic Working Papers at Centro de Estudios Andaluces E2004/48, Centro de Estudios Andaluces. [Downloadable!]
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