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Public Expenditures, Taxes, Federal Transfers, and Endogenous Growth

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  • LIUTANG GONG
  • HENG‐FU ZOU

Abstract

This paper extends the Barro (1990) model with single aggregate government spending and one flat income tax to include public expenditures and taxes by multiple levels of government. It derives the rate of endogenous growth and, with both simulations and special examples, examines how that rate changes with respect to federal income tax, local taxes, and federal transfers. It also discusses the growth and welfare-maximizing choices of taxes and federal transfers.
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Suggested Citation

  • Liutang Gong & Heng‐Fu Zou, 2011. "Public Expenditures, Taxes, Federal Transfers, and Endogenous Growth," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(6), pages 973-991, December.
    • Handle: RePEc:bla:jpbect:v:13:y:2011:i:6:p:973-991
    DOI: j.1467-9779.2011.01529.x
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    References listed on IDEAS

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    1. King, Robert G & Rebelo, Sergio, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 126-150, October.
    2. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
    3. Zou, Heng-fu, 1996. "Taxes, Federal Grants, Local Public Spending, and Growth," Journal of Urban Economics, Elsevier, vol. 39(3), pages 303-317, May.
    4. Wallace E. Oates & Wallace E. Oates, 2004. "Fiscal Decentralization and Economic Development," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 21, pages 377-383, Edward Elgar Publishing.
    5. Devarajan, Shantayanan & Danyang, Xie & Zou, Heng-fu, 1998. "Should public capital be subsidized or provided?," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 319-331, April.
    6. Zhang, Tao & Zou, Heng-fu, 1998. "Fiscal decentralization, public spending, and economic growth in China," Journal of Public Economics, Elsevier, vol. 67(2), pages 221-240, February.
    7. Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association;National Tax Journal, vol. 46(2), pages 207-227, June.
    8. Glomm, Gerhard & Ravikumar, B., 1994. "Public investment in infrastructure in a simple growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1173-1187, November.
    9. Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association, vol. 46(2), pages 207-27, June.
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    Cited by:

    1. Liutang Gong & Heng-fu Zou, 2003. "Fiscal Federalism, Public Capital Formation, and Endogenous Growth," Annals of Economics and Finance, Society for AEF, vol. 4(2), pages 471-490, November.
    2. Cheng‐wei Chang, 2023. "Optimal fiscal policy under monopolistic competition with firm heterogeneity," Scottish Journal of Political Economy, Scottish Economic Society, vol. 70(5), pages 423-438, November.
    3. Alexander Deryigin & Irina Filippova & Igor Arlashkin, 2021. "Impact of intraregional tax decentralization on the development of the income base of the regions [Влияние Внутрирегиональной Налоговой Децентрализации На Развитие Доходной Базы Регионов]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 2, pages 8-33, April.
    4. Igor Yu. Arlashkin, 2020. "Intergovernmental Fiscal Instruments for Stimulating Regional Economic Growth in Russia," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 54-68, December.
    5. Hsun Chu & Ching-Chong Lai & Chu-Chuan Cheng, 2015. "Tax Havens, Growth, and Welfare," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(6), pages 802-823, December.
    6. Liutang Gong & Heng-fu Zou, 1998. "Fiscal Policies in a Finite Horizon Model with the Spirit of Capitalism," CEMA Working Papers 102, China Economics and Management Academy, Central University of Finance and Economics.

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    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H4 - Public Economics - - Publicly Provided Goods
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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