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Optimal Taxation and Growth with Public Goods and Costly Enforcement

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Author Info
Pierre-Richard Agénor
Kyriakos C. Neanidis

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Abstract

This paper studies optimal direct and indirect taxation rules in an endogenous growth framework where public goods, in the form of infrastructure and health services, affect both production and household utility. Growth- and welfare-maximizing rules are first derived in a setting where collection costs are absent. The analysis is then extended to consider the case where tax collection is costly. Optimal tax rules are derived under alternative assumptions about the nature of these costs. The possibility of multiple equilibria is examined, together with the joint determination of the tax structure and the share of public spending on tax enforcement.

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File URL: http://www.socialsciences.manchester.ac.uk/cgbcr/dpcgbcr/dpcgbcr89.pdf
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Publisher Info
Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 89.

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Length: 41 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:man:cgbcrp:89

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    Other versions:
  4. Kaplow, Louis, 1990. "Optimal taxation with costly enforcement and evasion," Journal of Public Economics, Elsevier, vol. 43(2), pages 221-236, November. [Downloadable!] (restricted)
    Other versions:
  5. Pierre-Richard Agénor, 2005. "Health and Infrastructure in Models of Endogenous Growth," The School of Economics Discussion Paper Series 0539, Economics, The University of Manchester. [Downloadable!]
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  6. Pecorino, Paul, 1993. "Tax structure and growth in a model with human capital," Journal of Public Economics, Elsevier, vol. 52(2), pages 251-271, September. [Downloadable!] (restricted)
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  8. Fisher, Walter H & Turnovsky, Stephen J, 1998. "Public Investment, Congestion, and Private Capital Accumulation," Economic Journal, Royal Economic Society, vol. 108(447), pages 399-413, March. [Downloadable!] (restricted)
  9. Hung, Fu-Sheng, 2005. "Optimal composition of government public capital financing," Journal of Macroeconomics, Elsevier, vol. 27(4), pages 704-723, December. [Downloadable!] (restricted)
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  12. Giancarlo Corsetti & Nouriel Roubini, 1996. "Optimal Government Spending and Taxation in Endgenous Growth Models," NBER Working Papers 5851, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Futagami, Koichi & Morita, Yuichi & Shibata, Akihisa, 1993. " Dynamic Analysis of an Endogenous Growth Model with Public Capital," Scandinavian Journal of Economics, Blackwell Publishing, vol. 95(4), pages 607-25, December.
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  18. Pierre Richard Agénor & Kyriakos C. Neanidis, 2006. "The Allocation of Public Expenditure and Economic Growth," The School of Economics Discussion Paper Series 0608, Economics, The University of Manchester. [Downloadable!]
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  20. Baier, Scott L. & Glomm, Gerhard, 2001. "Long-run growth and welfare effects of public policies with distortionary taxation," Journal of Economic Dynamics and Control, Elsevier, vol. 25(12), pages 2007-2042, December. [Downloadable!] (restricted)
  21. Chryssi Giannitsarou, 2007. "Balanced Budget Rules and Aggregate Instability: The Role of Consumption Taxes," Economic Journal, Royal Economic Society, vol. 117(523), pages 1423-1435, October. [Downloadable!] (restricted)
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  22. Rafael Doménech & Jose Ramón García, 2002. "Optimal Taxation and Public Expenditure in a Model of Endogenous Growth," Topics in Macroeconomics, Berkeley Electronic Press, vol. 2(1), pages 1040-1040. [Downloadable!] (restricted)
  23. Lee, Young & Gordon, Roger H., 2005. "Tax structure and economic growth," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1027-1043, June. [Downloadable!] (restricted)
  24. Michael Bleaney & Norman Gemmell & Richard Kneller, 2001. "Testing the endogenous growth model: public expenditure, taxation, and growth over the long run," Canadian Journal of Economics, Canadian Economics Association, vol. 34(1), pages 36-57, February. [Downloadable!] (restricted)
  25. Ingrid Ott & Stephen J. Turnovsky, 2006. "Excludable and Non-excludable Public Inputs: Consequences for Economic Growth," Economica, London School of Economics and Political Science, vol. 73(292), pages 725-748, November. [Downloadable!] (restricted)
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  26. 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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  27. Turnovsky, Stephen J., 1996. "Optimal tax, debt, and expenditure policies in a growing economy," Journal of Public Economics, Elsevier, vol. 60(1), pages 21-44, April. [Downloadable!] (restricted)
  28. Garcia Penalosa, Cecilia & Turnovsky, Stephen J., 2005. "Second-best optimal taxation of capital and labor in a developing economy," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1045-1074, June. [Downloadable!] (restricted)
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  29. Been-Lon Chen, 2003. "Tax Evasion in a Model of Endogenous Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(2), pages 381-403, April. [Downloadable!] (restricted)
  30. ColemanII, Wilbur John, 2000. "Welfare and optimum dynamic taxation of consumption and income," Journal of Public Economics, Elsevier, vol. 76(1), pages 1-39, April. [Downloadable!] (restricted)
  31. Park, Hyun & Philippopoulos, Apostolis, 2002. "Dynamics Of Taxes, Public Services, And Endogenous Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 6(02), pages 187-201, April. [Downloadable!]
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