Aufsatz(elektronisch)5. November 2003
Government Spending, Local Indeterminacy and Tax Structure
In: Economica, Band 70, Heft 280, S. 639-653
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Abstract
This paper develops an endogenous growth model where sustained growth is due to the introduction of a public input. Consumers derive utility from consumption, leisure and a public good. The public input and the public good are the flow of government expenditures. These expenditures are financed by means of income taxes. With these assumptions, it is shown that the dynamic equilibrium may exhibit local indeterminacy when the tax rate on the labour income is large. The tax structure that maximizes growth and the optimal tax structure are characterized and compared.
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