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The Non-monotonic Relationship between Taxation and Long Term Equilibrium in a Model of Endogenous Lifetime and Economic Growth

Author

Listed:
  • Ahmad Naimzada

    (Department of Economics, University of Milan-Bicocca)

  • Giorgio Ricchiuti

    (University of Florence)

Abstract

In this paper, we shed light on the relationship between taxation and steady states by analyzing the OGL model of Chakraborty [2004]. We show that there is (i) a non-monotonic relationship between taxation and growth; (ii) a threshold value of taxation in such a way that there is no effect on the steady state; and finally, (iii) the effect on the two nontrivial steady states is not equal: an increase in tax rate will initially reduce (increase) the unstable (stable) steady state and will then increase (reduce) it.

Suggested Citation

  • Ahmad Naimzada & Giorgio Ricchiuti, 2006. "The Non-monotonic Relationship between Taxation and Long Term Equilibrium in a Model of Endogenous Lifetime and Economic Growth," Working Papers 105, University of Milano-Bicocca, Department of Economics, revised 2006.
    • Handle: RePEc:mib:wpaper:105
    as

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    File URL: http://repec.dems.unimib.it/repec/pdf/mibwpaper105.pdf
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    References listed on IDEAS

    as
    1. Gregory Ponthiere, 2006. "Growth, Longevity and Public Policy," CESifo Working Paper Series 1780, CESifo.
    2. Kalemli-Ozcan, Sebnem & Ryder, Harl E. & Weil, David N., 2000. "Mortality decline, human capital investment, and economic growth," Journal of Development Economics, Elsevier, vol. 62(1), pages 1-23, June.
    3. Helle Bunzel & Xue Qiao, 2005. "Endogenous lifetime and economic growth revisited," Economics Bulletin, AccessEcon, vol. 15(8), pages 1-8.
    4. Kalemli-Ozcan, Sebnem, 2002. "Does the Mortality Decline Promote Economic Growth?," Journal of Economic Growth, Springer, vol. 7(4), pages 411-439, December.
    5. Ehrlich, Isaac & Lui, Francis T, 1991. "Intergenerational Trade, Longevity, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1029-1059, October.
    6. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
    7. Ken‐ichi Hashimoto & Ken Tabata, 2005. "Health Infrastructure, Demographic Transition and Growth," Review of Development Economics, Wiley Blackwell, vol. 9(4), pages 549-562, November.
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    More about this item

    Keywords

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    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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