growth and inequality in the dual model of development the role of demand factors this paper relates growth and income distribution in the development of a dual economy its originality lies in the fact that the analysis of income inequality uses the whole lorenz curve instead of some summary measures and that the dual economy is represented through a fully specified general equilibrium model conditions for particular shifts in the lorenz curve are derived they mostly involve the income and price elasticities of demand faced by the traditional sector of the economy and suggest that an unambiguous drop in income inequality is somewhat unlikely at the dual stage of development

a portfolio approach to endogenous growth equilibrium and optimal policy abstract this paper develops a portfolio approach to modeling endogenous growth in continuous time that is especially suitable for addressing fiscal and financial issues in policy design the analysis focuses on the equilibrium relationship between fiscal and financial policy rates of return and wealth allocation we analyze two models the first is based on the arrow romer model with increasing returns and an external effect of capital on labor productivity the second draws on barro s analysis of government spending and endogenous growth in both models we study the equilibrium allocation and discuss the optimal fiscal and financial policy

risk the financial market and macroeconomic equilibrium growing recognition of the importance of stock market phenomena to the real economy underscores the need for models linking exogenous uncertainty asset market performance and the rest of the economy in an optimizing framework without certainty equivalence this paper constructs a three agent model with continuous time stochastic variables uncertain private production and government expenditure and forward looking rational agents the growth rate of output physical capital accumulation financial asset returns and uncertain inflation are determined as functions of the exogenous uncertainty in the economy analysis of the model finds that increased risk associated with government policy often reverses in an explainable way the conventional comparative static predictions of nonstochastic macro models

the theory of taxation for developing countries tax policy has far reaching implications for economic development and public administration this book which presents a modern theory of public finance brings together many of the most distinguished economists who have written on the subject they provide coherent principles for tax design and a systematic framework for the analysis of practical questions of tax reform and pricing policy in developing countries the book is especially timely as countries experience increasing shortages of government revenue and the distortions brought about by poorly designed tax systems it pays particular attention to the special problems of developing countries such as the taxation of agriculture the aim throughout is to develop techniques that can be quantitatively applied given the data available and empirical case studies illustrate the methods in action the authors analyze the links between tax theory social cost benefit analysis and the pricing of publicly supplied goods and services they also explore the empirical and econometric problems of identifying the tradeoffs between equity and efficiency other topics treated include the analysis of labor markets the taxation of foreign private investment and of fuel and the pricing of education although the models used concentrate on developing countries most of the methods and discussion apply as well to the problems of more affluent countries

risk optimal government finance and monetary policies in a growing economy optimal tax and monetary policies in a stochastic monetary growth model are investigated our findings are of three general types first both capital income taxes and monetary growth are shown to influence the economy through effective risk adjusted measures expressed as a linear function of their respective means and variances second two stochastic neutrality results relating to money and bonds the two nominal assets in the economy are identified third optimal policy rules relating to taxes bond finance and money creation are characterized an essential component of optimal financial policy is a risk adjusted balanced budget

growth effects of flat rate taxes recent estimates of the potential growth effects of tax reform vary wildly ranging from zero to eight percentage points using an endogenous growth model we assess which model features and parameter values are important for determining the quantitative impact of tax reform we find that the critical parameters are factor shares depreciation rates the elasticity of intertemporal substitution and the elasticity of labor supply the elasticities of substitution in production on the other hand are relatively unimportant the quantitative estimates in several recent papers are compared with each other and with some of the evidence from u s experience we find that robert lucas s conclusion that tax reform would have little or no effect on the u s growth rate is theoretically robust and consistent with the evidence

wealth distribution and output fluctuations we explore the link between wealth inequality and output fluctuations in a general two sector neoclassical growth model with endogenous labor and heterogeneous agents when agents have homogeneous crra preferences and individual wealth is pareto distributed a sufficiently large rise in the gini index typically leads to an increase in endogenous fluctuations of output for general economies we show that under plausible conditions on the fundamentals wealth inequality is still a destabilizing factor

dualism and macroeconomic volatility this paper develops a simple macroeconomic model that shows that combining capital market imperfections together with unequal access to investment opportunities across individuals can generate endogenous and permanent euctuations in aggregate gdp investment and interest rates reducing inequality of access may be a necessary condition for macroeconomic stabilization moreover countercyclical escal policies have a role to play in our model savings are underutilized in slumps because of the limited debt capacity of potential investors therefore the government should issue public debt during recessions in order to absorb those idle savings and enance investment subsidies or tax cuts for investors the most important single fact about saving and investment activities is that in our industrial society they are generally done by different people and for different reasons for years there might tend to be too little investment leading to deeation losses excess capacity and unemployment for other years there might tend to be too much investment leading to periods of chronic ineation unless prudent and proper public policies in the escal and monetary eelds are followed paul a samuelson economics 8th edition 1970 pp 196 198

captial mobility distributive conflict and international tax coordination basic economic theory identifies a number of efficiency gains that derive from international capital mobility but just as with free trade in goods there is no guarantee that capital mobility makes everyone better off consequently capital mobility may be politically unsustainable even though it enhances efficiency this paper discusses how such a dilemma might arise and suggests that international tax coordination might serve as a way out under some circumstances c 2001 published by elsevier science b v

equilibrium consumption and precautionary savings in a stochastically growing economy abstract the derivation of a closed form solution for consumption based on the constant elasticity utility function in the presence of stochastic labor income has proved to be intractable this paper derives a closed form equilibrium relationship between consumption and wealth one that holds along a balanced growth path in a stochastic romer endogenous growth model by employing more general recursive preferences we can disentangle the coefficient of relative risk aversion from the intertemporal elasticity of substitution the effects of key structural parameters on equilibrium consumption and its tradeoff with leisure are analyzed a significant aspect of our analysis concerns the extent to which current risk in the economy is shared between labor and capital this plays an important role in determining the impact of risk on the economy in general and on consumption in particular formal analysis is supplemented with extensive numerical simulations

fiscal policy and the structure of production in a two sector developing economy abstract this paper develops a two sector model of a developing economy and examines the role of the informal sector in limiting the government s ability to increase tax revenues a key feature is the introduction of auditing of the informal sector and degree of tax enforcement in that sector we emphasize the interdependence between tax policy and enforcement in achieving a developing economy s fiscal objectives and show that by judicious policy choices the presence of the informal sector need not hinder its ability to raise tax revenues we supplement the formal analysis with numerical simulations highlighting the contrasting intertemporal tradeoffs implied by higher tax rates and tax enforcement levels

production risk and the functional distribution of income in a developing economy tradeoffs and policy responses abstract we develop a stochastic endogenous growth model to examine the relationship between the volatility of growth and the factor distribution of income our framework incorporates two important features of developing economies the co existence of a modern and a traditional sector and the fact that the income generated in the traditional sector can escape taxation the relationship between volatility and factor distribution is complex depending upon the source of risk and the elasticity of substitution between capital and labor in the formal sector the policy options available to the government for counteracting changes in volatility are analyzed the second best optimal tax structure is also characterized

czechoslovakia recent economic developments and prospects czechoslovakia provides a unique example of a country that became underdeveloped as a result of an externally imposed system before world war ii czechoslovakia was a democracy with gnp per capita similar to that of belgium and austria its industries were on the technological edge and its products were known worldwide for their superb workmanship by 1990 czechoslovak gnp per capita is estimated by the world bank at 3 300 thus being comparable to that of venezuela gabon and yugoslavia but only slightly above one fifth of that of austria and belgium 1 most czechoslovak products are now of mediocre quality and selling at a discount if at all in the west this remarkable transition occurred over approximately 40 years during the postworld war ii reconstruction the country was still run as a market economy although major parts of industry banking and insurance were already nationalized after the 1948 communist takeover soviet type economic planning was imposed the remaining private enterprises were nationalized 2 and priority was given to heavy industry czechoslovak foreign trade was reoriented from world markets toward soviet bloc countries the czechoslovak government adhered to the soviet type planning system faithfully throughout the 1950 s the economic slowdown in the early 1960 s led to a series of reform attempts that culminated during the prague spring of 1968 with a short lived and partial program of price liberalization separation of economic policy from political decision making enterprise autonomy and workers participation in enterprise management however central planning was reimposed after the 1968 invasion and remained virtually intact until the late 1980 s

foreign debt supply in an imperfect international capital market theory and evidence abstract we investigate the determinants of foreign borrowing costs in a stochastically growing economy we find that these increase with the debt wealth ratio depending also upon the volatilities of domestic and foreign origin and the length of debt contract in addition the sensitivity of the short term debt supply to the debt wealth ratio exceeds that of long term debt and the effects of volatility on the borrowing premium growth of wealth and its volatility depend on the relative size of a direct effect and a secondary portfolio adjustment effect of the initial shock as well as the length of the debt contract panel regressions suggest that the empirical evidence generally support the theoretical predictions

second best optimal taxation of capital and labor in a developing economy abstract as commercial integration reduces the reliance on foreign trade taxation raising tax revenue has become a major concern for the governments of developing economies this paper examines how the tax burden in a developing economy should be distributed between capital income and labor income we study a two sector model where the traditional sector is informal and consequently cannot be taxed by the government in this setup we find that the optimal second best tax structure in order to raise a certain amount of revenue requires to tax capital income at least as much as labor income and possibly more

consumption beyond certainty equivalence this paper discusses the recent research on the consumption function that has attempted to relax the assumption of certainty equivalence while there remain many open questions both theoretical and empirical it is clear that the assumption of certainty equivalence can be misleading under more plausible specifications of preferences toward risk uncertainty lowers the level of consumption increases the expected rate of growth of consumption and increases the response of consumption to news about income moreover changes in the amount of uncertainty are a potentially important source of fluctuations in consumption this abstract was borrowed from another version of this item

the kuznets process and the inequality development relationship abstract in his classic paper on economic growth and income inequality kuznets discussed the process of population shift from traditional to modern activities as the basis for a theory of distributional change during the course of development in this paper we present a formalization of the kuznets process conduct a general analysis of distributional change under this process and derive the functional forms of and conditions for a turning point in the inequality development relationship for six commonly used indices of inequality the functional form appropriate to each index is then estimated using cross section data on 60 developing and developed countries finally some extensions to the initial formalization of the kuznets process are considered

the economic transition of czechoslovakia from plan to market the communist government of czechoslovaki a was ousted in the socalled velvet revolution of november 1989 and the new regime adopted as its goal the transformation of the economy to one based on markets and private property and also one more dynamic and productive than its predecessor this unprecedented transformation poses a variety of intellectual political and economic questions at the same time that the economic system is being transformed the government must also ensure that the hybrid economy that exists during the transition functions sufficiently well to maintain adequate living standards and to sustain political support for the reform process in this paper i examine the economic and intellectual legacies that have shaped the transition process in czechoslovaki a describe the system changes implemented or contemplated for the near future and briefly comment on macroeconomic performance

tax evasion under differential taxation the economics of income source misreporting abstract if different income sources are subject to different rates of taxation a taxpayer may find it worthwhile to evade taxes by declaring part of his higher taxed income as stemming from a lower taxed source this paper inquires into the determinants of income source misreporting focusing on the relationships between misreporting and taxation under alternative penalty schemes allowing the taxpayer the choice between source misreporting and pure underreporting the paper examines also the relative amount of tax escaping the tax collector through the alternative forms of evasion and determines the conditions under which one will be preferred to the other

production technologies in stochastic continuous time models abstract properties of dynamic stochastic general equilibrium models can be revealed by either using numerical solutions or qualitative analysis very precise and intuition building results are obtained by working with models which provide closed form solutions closed form solutions are known for a large class of models some of which however have some undesirable features such as potentially negative output this paper offers closed form solutions for models which are just as tractable but do not suffer from these shortcomings

cross country evidence on the link between volatility and growth this paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of economic fluctuations in a sample of ninety two countries as well as a sample of oecd countries the authors find that countries with higher volatility have lower growth the addition of standard control variables strengthens the negative relationship the authors also find that government spending induced volatility is negatively associated with growth even after controlling for both time and country fixed effects copyright 1995 by american economic association