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Optimal Growth Taxation

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  • Marcus Davidsson

Abstract

Government usually tends to have two options. They can either pursue a tax revenue maximizing strategy or a growth maximizing strategy. The two approached do not necessarily go hand in hand. This paper derives and empirically estimates a simple laissez faire optimal taxation model from the perspective of economic growth. The finding is that governments tend to systematically over tax the economy which leads to suboptimal allocations. Politicians tend to prefer high taxation over a cut in public spending i.e. a reduction in public sector jobs.

Suggested Citation

  • Marcus Davidsson, 2012. "Optimal Growth Taxation," Research in World Economy, Research in World Economy, Sciedu Press, vol. 3(1), pages 35-44, March.
    • Handle: RePEc:jfr:rwe111:v:3:y:2012:i:1:p:35-44
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    File URL: http://www.sciedu.ca/journal/index.php/rwe/article/view/857/480
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    File URL: http://www.sciedu.ca/journal/index.php/rwe/article/view/857
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    Cited by:

    1. Yawovi Mawussé Isaac Amedanou, 2019. "Optimal Taxation and Economic Growth in Togo: Empirical Investigation in Time Series [Taxation Optimale et Croissance Economique au Togo : une Evidence Empirique en Séries Temporelles]," Post-Print hal-01990213, HAL.
    2. Jeeban Amgain, 2017. "Estimating Optimal Level of Taxation for Growth Maximization in Asia," Applied Economics and Finance, Redfame publishing, vol. 4(3), pages 47-55, May.

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