The Growth‐maximizing Tax Rate

In: Pacific economic review, Band 5, Heft 1, S. 93-96

Abstract

This note is a reply to Professor Kennedy's criticism of the specification of my model on taxation and economic growth and my testing of the degree of homogeneity of the growth‐generating function in an earlier paper in this journal. I find that the model relating the pattern in the growth rate to the pattern in the division of the share of output is not affected by incorporating factor inputs into the model, that the function is homogeneous of degree one, and that the growth‐maximizing tax rate of about 20 percent of GDP stands, as in the original paper.