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Growth Effects of Income and Consumption Taxes: Positive and Normative Analysis

  • Gian Maria Milesi-Ferretti
  • Nouriel Roubini

The effects of income and consumption taxation are examined in the context of modesl in which the growth process is driven by the accumulation of human and physical capital. The different channels through which these taxes affect economic growth are discussed, and it is shown that in general the taxation of factor incomes (human and physical captial) is growth-reducing. The effects of consumption taxation on growth depend crucially on the elasticity of labor supply, and therefore on the specification of the leisure activity. The paper also derives implicatiions for the optiaml intertemporal choice of tax instruments.

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Paper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 95-18.

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Date of creation: Oct 1995
Date of revision:
Handle: RePEc:ste:nystbu:95-18
Contact details of provider: Postal: New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126
Phone: (212) 998-0860
Fax: (212) 995-4218
Web page: http://w4.stern.nyu.edu/economics/

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