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Dynamic Scoring in a Romer-Style Economy

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  • Dean Scrimgeour

    () (Economics Department, Colgate University, 13 Oak Drive, Hamilton, NY 13346, USA)

Abstract

This article analyzes how changes in tax rates affect government revenue in a Romer-style endogenous growth model. Lower tax rates on financial income (returns to physical capital and intellectual property) are partially self-financing primarily because lower financial income taxes stimulate innovation and enhance labor productivity in the long run. In the baseline calibration, about half of a tax cut is self-financing in the long run, substantially more than in the Ramsey model. The dynamics of the economy's response to a tax cut are very sluggish and, for some variables, nonmonotonic.

Suggested Citation

  • Dean Scrimgeour, 2015. "Dynamic Scoring in a Romer-Style Economy," Southern Economic Journal, Southern Economic Association, vol. 81(3), pages 697-723, January.
  • Handle: RePEc:sej:ancoec:v:81:3:y:2015:p:697-723
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    File URL: http://dx.doi.org/10.4284/0038-4038-2014.064
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    Cited by:

    1. Andreas Irmen & Amer Tabakovic, 2016. "Factor Income Distribution and Endogenous Economic Growth - When Piketty meets Romer -," CREA Discussion Paper Series 16-18, Center for Research in Economic Analysis, University of Luxembourg.
    2. van Oudheusden, P., 2012. "Dynamic Scoring Through Creative Destruction," Discussion Paper 2012-084, Tilburg University, Center for Economic Research.
    3. repec:eee:reveco:v:51:y:2017:i:c:p:545-561 is not listed on IDEAS

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    JEL classification:

    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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