Public Policy And Economic Growth: Developing Neoclassical Implications
AbstractWhy do the countries of the world display considerable disparity in long-term growth rates? This paper examines the hypothesis that the answer lies in differences in national public policies that affect the incentives that individuals have to accumulate capital in both its physical and human forms. The authors' analysis of a calibrated two-sector endogenous growth model shows that the incentive effects of taxation can induce large differences in long-run growth rates. This influence of taxation on the rate of economic growth has important welfare implications: in basic endogenous growth models, the welfare cost of a 10 percent increase in the rate of income tax can be forty times larger than in the basic neoclassical model. Copyright 1990 by University of Chicago Press.
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Bibliographic InfoPaper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 225.
Length: 26 pages
Date of creation: 1988
Date of revision:
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Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.
economic growth ; human resources ; economic models ; fiscal policy;
Other versions of this item:
- King, Robert G & Rebelo, Sergio, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(5), pages S126-50, October.
- Robert G. King & Sergio Rebelo, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," NBER Working Papers 3338, National Bureau of Economic Research, Inc.
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