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Public Expenditures, Taxes, Federal Transfers, and Endogenous Growth

  • Liutang Gong

    (Guanghua School of Management, Peking University)

  • Heng-fu Zou

    (CEMA, Central University of Finance and Economics
    Shenzhen University
    Wuhan University
    The World Bank)

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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Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 524.

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Length: 21 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:cuf:wpaper:524
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  1. King, R.G. & Rebelo, S., 1988. "Public Policy And Economic Growth: Developing Neoclassical Implications," RCER Working Papers 225, University of Rochester - Center for Economic Research (RCER).
  2. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
  3. 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.
  4. Tao Zhang & Heng-fu Zou, 1996. "Fiscal decentralization, public spending, and economic growth in China," Policy Research Working Paper Series 1608, The World Bank.
  5. 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.
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