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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
    DOI: 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 -," DEM Discussion Paper Series 16-18, Department of Economics at the University of Luxembourg.
    2. Huang, Wei-Chi & Lai, Ching-Chong & Chen, Ping-Ho, 2017. "International R&D funding and patent collateral in an R&D-based growth model," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 545-561.
    3. van Oudheusden, P., 2012. "Dynamic Scoring Through Creative Destruction," Other publications TiSEM 13955715-2cbb-443b-a099-9, Tilburg University, School of Economics and Management.
    4. Yuqing Geng & Nan Zhao, 2020. "Measurement of sustainable higher education development: Evidence from China," PLOS ONE, Public Library of Science, vol. 15(6), pages 1-18, June.
    5. Andreas Irmen & Amer Tabakovic, 2020. "Factor Income Distribution And Endogenous Economic Growth: Piketty Meets Romer," Economic Inquiry, Western Economic Association International, vol. 58(3), pages 1342-1361, July.
    6. van Oudheusden, P., 2012. "Dynamic Scoring Through Creative Destruction," Discussion Paper 2012-084, Tilburg University, Center for Economic Research.

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    More about this item

    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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