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A Note on Commodity Taxation and Economic Growth

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  • Kunihiko Konishi

    () (Graduate School of Economics, Osaka University)

Abstract

This note reexamines the growth effects of commodity taxation and a manufacturing subsidy. By incorporating endogenous labor supply into a variety expansion model following Grossman and Helpman (1991), we derive new results. First, if households consider leisure to be important, an increase in the commodity tax rate can decrease the growth rate in the short run. Second, a small elasticity of substitution and a small manufacturing subsidy halt economic growth. Third, when the elasticity of substitution is small and sustained growth is possible, a decrease in the subsidy raises the short-run growth rate and decreases the long-run growth rate.

Suggested Citation

  • Kunihiko Konishi, 2013. "A Note on Commodity Taxation and Economic Growth," Discussion Papers in Economics and Business 13-22, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  • Handle: RePEc:osk:wpaper:1322
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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1322.pdf
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    References listed on IDEAS

    as
    1. Pecorino, Paul, 1993. "Tax structure and growth in a model with human capital," Journal of Public Economics, Elsevier, vol. 52(2), pages 251-271, September.
    2. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    3. Koichi Futagami & Junko Doi, 2004. "Commodity Taxation and Economic Growth," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 46-55.
    4. King, Robert G & Rebelo, Sergio, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 126-150, October.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Commodity taxation; Subsidy; Labor supply; Endogenous growth;

    JEL classification:

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

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