A Note on Commodity Taxation and Economic Growth
AbstractThis note reexamines the growth effects of commodity taxation and a manufacturing subsidy. By incorporating endogenous labor supply into a variety expansion model following Grossman and Helpman (1991), we derive new results. First, if households consider leisure to be important, an increase in the commodity tax rate can decrease the growth rate in the short run. Second, a small elasticity of substitution and a small manufacturing subsidy halt economic growth. Third, when the elasticity of substitution is small and sustained growth is possible, a decrease in the subsidy raises the short-run growth rate and decreases the long-run growth rate.
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Bibliographic InfoPaper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 13-22.
Length: 17 pages
Date of creation: Sep 2013
Date of revision:
Commodity taxation; Subsidy; Labor supply; Endogenous growth;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- 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-ACC-2013-09-06 (Accounting & Auditing)
- NEP-ALL-2013-09-06 (All new papers)
- NEP-FDG-2013-09-06 (Financial Development & Growth)
- NEP-MAC-2013-09-06 (Macroeconomics)
- NEP-PBE-2013-09-06 (Public Economics)
- NEP-PUB-2013-09-06 (Public Finance)
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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