the effects of fiscal policy in a two country world economy an intertemporal analysis this paper analyzes the effects of fiscal policy using a two country general equilibrium model a key finding is that a shift in government spending from productive purchases to consumption purchases causes a rising trade deficit and an appreciation of the terms of trade consistent with the u s experiences in the 1980s productive public services play a critical role in these adjustments by driving a wedge between the rates of return on domestic and foreign capital a temporary cut in the capital income tax is also crucial for explaining a persistent trade deficit and an appreciation of the terms of trade copyright 1995 by ohio state university press

dynamic scoring alternative financing schemes abstract neoclassical growth models predict that reductions in capital or labor income tax rates are expansionary when lump sum transfers are used to balance the government budget this paper explores the consequences of bond financed tax reductions that bring forth a range of possible offsetting policies including future government consumption capital tax rates or labor tax rates through the resulting intertemporal distortions current tax cuts can be expansionary or contractionary the paper also finds that more aggressive responses of offsetting policies to debt engender less debt accumulation and less costly tax cuts

optimal taxation in models of endogenous growth we study the problem of optimal taxation in three infinite horizon representative agent endogenous growth models the first model is a convex model in which physical and human capital are perfectly symmetric our second model incorporates elastic labor supply through a lucas style technology analysis of these two models points out the danger of assuming that government expenditures are exogenous in our third model we include government expenditures as a productive input in capital formation showing that the limiting tax rate on capital is no longer zero in numerical simulations we find similar effects on growth and welfare in all three models

uniqueness and indeterminacy on the dynamics of endogenous growth abstract in this paper we study the dynamics of endogenous growth both in the model of lucas and in a generalization that incorporates a labor leisure choice we characterize the regions of the parameter space that give rise to unique equilibria as well as the regions that yield a continuum of equilibria with positive growth rates we find that such multiple equilibria exist for empirically very plausible parameters in particular when the lucas model is modified to incorporate endogenous labor journal of economic literature numbers e00 e3 o40

the impacts of china s household consumption expenditure patterns on energy demand and carbon emissions towards 2050 abstract this paper explores how china s household consumption patterns over the period 2005 2050 influence the total energy demand and carbon dioxide co2 emissions in two baseline scenarios and how it influences carbon prices as well as the economic cost in the corresponding carbon mitigation scenarios to this end we first put forward two possible household consumption expenditure patterns up to 2050 using the working leser model taking into account total expenditure increase and urbanization for comparison both expenditure patterns are then incorporated in a hybrid recursive dynamic computable general equilibrium model the results reveal that as income level increases in the coming decades the direct and indirect household energy requirements and co2 emissions would rise drastically when household expenditure shifts from material products and transport to service oriented goods around 21 000 mtce 1 of primary energy and 45 billion tons of co2 emissions would be saved over the 45 year period from 2005 to 2050 moreover carbon prices in the dematerialized mitigation scenario would fall by 13 in 2050 thus reducing the economic cost

fiscal policy elastic labor supply and endogenous growth abstract endogenizing labor supply leads to fundamental changes in the equilibrium structure of the ak growth model the balanced growth equilibrium can be described in terms of two tradeoff loci relating the equilibrium growth rate to the fraction of time devoted to leisure the implications of endogenous labor supply for fiscal policy are analyzed three issues are addressed first the effects of various distortionary tax changes and government expenditure changes on the equilibrium growth leisure employment tradeoff are analyzed second optimal fiscal policy is characterized finally the formal analysis is supplemented by numerical results focusing particularly on the quantitative welfare implications

on the analytics of the dynamic laffer curve in this paper we analyze government budget balance within a simple model of endogenous growth for the ak model simple analytical conditions for a tax cut to be self financing can be derived the critical variable is not the tax rate per se but the transfer adjusted tax rate we discuss some conceptual issues in dynamic revenue analysis and we explain why previous studies have arrived at seemingly contradictory results finally we perform an empirical study of the transfer adjusted tax rates of the oecd countries to see which country has the highest potential for fiscal improvements it turns out that only a few countries have any potential for such dynamic scoring

anticipated environmental policy and transitional dynamics in an endogenous growth model this paper makes a new attempt toinvestigate how an anticipatedenvironmental policy governs the transitionaldynamics of an economy when pollutionexternality is taken into account themodeling strategy we use is an ak technologyendogenous growth framework with an endogenousleisure labor choice it is found that unlikeinelastic labor supply framework a rise inpublic abatement expenditure will stimulate thebalanced economic growth rate it is alsofound that public abatement technology plays animportant role in determining the transitionaladjustment of the economic growth rate inresponse to a pre announced environmentalpolicy

equilibrium dynamics in two sector models of endogenous growth abstract this paper considers two extensions of the uzawa lucas framework in our first extension physical capital is included as an input of the educational sector in our second extension leisure considerations are assumed to play a positive role in agents welfare the case with physical capital in the production of education features under standard conditions a unique steady state and thus the dynamics are qualitatively similar to those of the original uzawa lucas framework in our second model with leisure there could be a multiplicity of steady states with different rates of growth what determines here the chosen rate of growth is the initial relative amount of physical and human capital our results therefore illustrate that in a world without externalities there could coexist different long term growth rates

capital skill complementarity and balanced growth we construct a general equilibrium version of the krusell et al econometrica 68 1029 2000 model with capital skill complementarity we assume several sources of growth simultaneously exogenous growth of skilled and unskilled labour equipment specific technological progress skilled and unskilled labouraugmenting technological progress and hicks neutral technological progress we derive restrictions that make our model consistent with balanced growth a calibrated version of our model can account for the key growth patterns in the us data including those for capital equipment and structures skilled and unskilled labour and output but it fails to explain the long run behaviour of skilled labour wages and consequently the skill premium

tax structure and growth in a model with human capital abstract the effect of the tax structure on the long run growth rate of income and consumption is analyzed where tax structure refers to the mix of taxes on physical and human capital which satisfy an exogenously given government budget constraint the factor used intensively in the consumption good sector relative to the capital goods sector as a whole is taxed more highly in a growth maximizing tax structure an endogenous labor supply the tax treatment of depreciation and the effect of replacing the income tax with a consumption tax are all considered

the equilibrium approach to fiscal policy this paper lays out a simple model for the purpose of bringing together the various strands of the analysis of fiscal policy in an optimizing competitive equilibrium model the discussion centers on the critic al assumptions lying behind the ricardian equivalence proposition th e role of the time profile and composition of public expenditure and the timing of distortional taxation copyright 1988 by ohio state university press

fiscal policy inflation and the accumulation of risky capital the effect of government policies on the level of investment and inflation has become a major concern of policy makers in a number of industrial countries proposals to raise the level of business investment have included overall tax cuts tax incentives to spur investment and a reduction in the level of government spending this paper presents a theoretical apparatus to explore the relationships between fiscal policy government debt inflation and capital accumulation it develops a one sector growth model embodying a stochastic production function and government fiscal policy atomistic agents in the economy choose consumption levels and allocate their wealth between risky capital and risky government debt to maximize expected discounted utility over an infinite horizon fiscal policy by affecting asset yields affects the composition of portfolios the price of government bonds and the accumulation of capital the model is used to answer three general questions 1 does the level of government expenditure affect the rate of capital accumulation and inflation in steady state 2 does the mode of government finance when the choice is between an income tax and deficit finance affect these magnitudes 3 what is the effect of uncertainty in the productivity of capital on growth the analysis relates to several areas of literature 1 the analysis of the relationship between capital accumulation and debt 2 the theory of the demand for government debt 3 considerations of the effect of income taxation on risk bearing and 4 the analysis of capital accumulation under uncertainty 1 the effects on output and the capital stock of the government s expenditure decision and its decision to finance its expenditure by taxation or debt issue are explored in two major bodies of economic theory the literature on the burden of the debt as developed by modigliani 1961 diamond 1965 and phelps and shell 1969 for example implies that policies which increase the value of outstanding government debt will tend to lower the level of the capital stock by displacing capital with public debt in private wealth the theory of money and growth as represented by tobin 1965 and sidrauski 1967b also implies that government debt displaces capital but specifically recognizes the role of capital gains on government debt

transitional dynamics in two sector models of endogenous growth the steady state and transitional dynamics of two sector models of endogenous growth are analyzed in this paper we describe necessary conditions for endogenous growth the conditions allow us to reduce the dynamics of the solution to a system with one state like and two control like variables we analyze the determinants of the long run growth rate we use the time elimination method to analyze the transitional dynamics of the models we find that there are transitions in real time if the point in time production possibility frontier is strictly concave which occurs for example if the two production functions are different or if there are decreasing point in time returns in any of the sectors we also show that if the models have a transition in real time the models are globally saddle path stable we find that the wealth or consumption smoothing effect tends to dominate the substitution or real wage effect so that the transition from relatively low levels of physical capital is carried over through high work effort rather than high savings we develop some empirical implications we show that the models predict conditional convergence in that in a cross section the growth rate is predicted to be negatively related to initial income but only after some measure of human capital is held constant thus the models are consistent with existing empirical cross country evidence authors

capital market integration and fiscal sustainability abstract by constructing a two country endogenous growth model with a debt financing government this paper studies the relationship between the sustainability of public finance and increases in inter regional factor mobility to this end it identifies the minimum tax rate that ensures fiscal sustainability against the backdrop of capital tax competition and studies whether competition for mobile capital lowers or improves fiscal sustainability the main findings are as follows i when countries are symmetric increasing capital flows promotes economic growth through the expansion of romer type knowledge spillovers resulting in increased fiscal sustainability in all countries and ii when a marked difference exists between countries tax competition caused by capital movements might lower fiscal sustainability in a country with abundant capital and large outstanding debt

supply side economics and endogenous growth abstract in a simple convex model of endogenous growth the expansionary effects of a deficit financed tax cut are often strong enough to allow the government debt to be paid off in the long run without the need for subsequent tax increases a permanent and substantial reduction in marginal rates of income taxation can provide for both vigorous real economic growth and long run government budget balance

budget balance welfare and the growth rate dynamic scoring of the long run government budget this paper determines conditions under which a reduction in the role of government either through a tax cut alone or together with accompanying expenditure cuts will improve long run government fiscal balance for a ceteris paribus cut in the income tax rate to improve long run government balance the intertemporal elasticity of substitution must exceed unity a tax cut balanced by an expenditure cut is likely to improve the long run balance even if it does not improve the short run balance the relationship between improving the long run fiscal balance and economic welfare is also analyzed

fiscal policy long run growth and welfare in a stock flow model of public goods we introduce public capital and public services as inputs in an endogenous growth model we show that the growth rate depends on the apportionment of tax revenues between the accumulation of public capital and the provision of public services when public spending is financed by proportional income taxes the growth rate the level of public spending as a proportion of gdp the level of investment in public capital as a proportion of total public spending and the level of private investment as a proportion of total private spending all are lower in the equilibrium outcome than in the optimal outcome jel classification e62 o40 politique fiscale croissance a long terme et bien etre dans un modele stock flow de biens publics les auteurs introduisent du capital public et des services publics comme intrants dans un modele de croissance endogene on montre que le taux de croissance depend de l allocation des revenus de la fiscalite entre l accumulation de capital public et la fourniture de services publics quand les depenses publiques sont financees par un impot proportionnel sur le revenu le taux de croissance le niveau de depenses publiques en pourcentage du pib le niveau d investissement en capital public et le niveau d investissement prive en proportion de la depense totale privee sont tous moins eleves au niveau d equilibre que ce qui serait le resultat optimal

the intertemporal elasticity of substitution in consumption in the united states and the united kingdom as robert e hall 1988 notes the magnitude of the intertemporal elasticity of substitution in consumption is one of the central questions of macroeconomics do higher expected real interest rates lead to deferred consumption the authors extend hall s methodology and model and compare results for the united sta tes and the united kingdom in both cases they directly estimate the mo ving average process that temporal aggregation might induce in the random disturbances and take account of consumers who do not follow the lif e cycle permanent income model of consumption copyright 1992 by mit press

excludable and non excludable public inputs consequences for economic growth non excludable and excludable public inputs are introduced into an endogenous growth model we derive the equilibrium growth rate and design the optimal tax and user cost structure emphasizing the role of congestion and its consequences for the government s budget the latter comprises fee and tax revenues that are used to finance the public inputs although they may generate insufficient revenue to do so entirely we extend the model to allow for monopoly pricing of the user fee by the government most of the analysis is conducted for general production functions consistent with endogenous growth but the ces technology is also considered a vast literature has evolved emphasizing the role of public investment as a determinant of economic growth among the earliest contributions arrow and kurz 1970 is particularly significant while the seminal work of barro 1990 has been especially influential with respect to the contemporary endogenous growth literature stimulated by aschauer s 1989 findings pertaining to the high rate of return on public capital several authors have explored various aspects of the role of public capital in stimulating economic growth for example baxter and king 1993 and fisher and turnovsky 1998 examine the interaction between public and private capital in a ramsey type growth model while futagami et al 1993 perform a similar type of analysis in an endogenous growth context glomm and ravikumar 1997 analyse the growth effects of productive public spending in an overlapping generations setup extending the framework to include majority voting and alternative compositions of publicly provided goods and services they also indicate private alternatives to public provision but do not pursue this in detail cassou and lansing 1998 focus on the relationship between private and public capital showing how the evolution of the ratio between the two in the us economy since 1925 is broadly consistent with the predictions of a simple ramsey growth model they also show how the productivity slowdown in the us economy since the 1970s is more likely due to increasing tax rates than to non optimal public investment policy much of the literature including barro treats the public input as a pure public good freely available without restrictions or impediments to all agents in the economy but the public goods literature identifies many different characteristics that most public goods in fact exhibit notably the presence of rivalry and or excludability see e g cornes and sandler 1996 thus the treatment of a public

habit formation and intertemporal substitution in individual food consumption individual food consumption data are used to examine three issues first is food consumption linked intertemporally at the individual level second does the association between current and past consumption reflect habit or heterogeneity third what do the estimates imply about the intertemporal elasticity of substitution the authors find that habit matters that controlling for heterogeneity reduces estimated habit effects and that the product of the estimated intertemporal elasticity of substitution and the risk aversion parameter is less than one these results all lead to rejection of time separable specifications of intertemporal consumption behavior copyright 1996 by mit press

laffer strikes again dynamic scoring of capital taxes abstract we set up a neoclassical growth model extended by a corporate sector an investment and finance decision of firms and a set of taxes on capital income we provide analytical dynamic scoring of taxes on corporate income dividends capital gains other private capital income and depreciation allowances and identify the intricate ways through which capital taxation affects tax revenue in general equilibrium we then calibrate the model for the us and explore quantitatively the revenue effects from capital taxation we take adjustment dynamics after a tax change explicitly into account and compare with steady state effects we find among other results a self financing degree of corporate tax cuts of about 70 90 and a very flat laffer curve for all capital taxes as well as for tax depreciation allowances results are strongest for the tax on capital gains the model predicts for the us that total tax revenue increases by about 0 3 1 2 after abolishment of the tax

growth and unemployment short run and long run tradeoffs abstract we consider the role of search unemployment and wage bargaining in determining the relationship between growth and unemployment while the long run tradeoffs between unemployment and growth are weak the short run tradeoffs are much stronger their comovement varies along the transitional path and depends upon the underlying structural change the consequences of the growth unemployment nexus for fiscal policy are addressed the analysis provides insights into the debate regarding the appropriate fiscal policy in light of the increased debt following the initial response to the recent financial crisis our analysis strongly supports an increase in government investment as the appropriate fiscal policy

the transitional dynamics of fiscal policy long run capital accumulation and growth this paper analyzes the effects of fiscal policies in a non scale growing economy with public and private capital the equilibrium dynamics are characterized and we contrast the dynamic effects of government expenditure on investment and expenditure on consumption under four alternative modes of tax financing most of our attention focuses on the numerical simulations of a calibrated economy the results emphasize the lengthy transition periods which implies that policies have sizeable level effects leading to substantial welfare effects even though long run growth rates are unaffected the paper highlights the intertemporal dimensions of fiscal policy and the tradeoffs these involve for economic performance especially growth and welfare

optimal taxation of capital income in general equilibrium with infinite lives this paper analyzes the optimal tax on capital income in general equilibrium models of the second best agents have infinite lives and utility functions which are extensions from the koopmans form the population is heterogeneous the important property of the models is the equality between the social and the private discount rates in the long run i find that the optimal tax rate is zero in the long run for a special case of additively separable utility functions i then determine the tax rates along the dynamic path and conditions that are sufficient for the local stability of the steady state

tax evasion and optimal commodity taxation abstract this paper incorporates tax evasion into ramsey s optimal taxation problem it provides i a precise and intuitive characterization of the tradeoff between optimal tax rates and audit probabilities and ii a modified version of the ramsey equation it also proves that in the presence of tax evasion a the well known requirement of proportional reduction in compensated demands b the traditional result on the optimality of uniform taxation when income is exogenous and c the equivalence of wage and uniform commodity taxes are no longer valid

optimal tax debt and expenditure policies in a growing economy abstract this paper employs an endogenous growth model to analyze the role of a consumption tax in enhancing growth and welfare provided government expenditure impacts directly on the decisions of private agents two fiscal instruments are necessary to replicate the first best optimum the tradeoff between consumption and income taxes to achieve this outcome is discussed and shown to depend upon the degree of congestion associated with the public good and the level of government expenditure relative to its social optimum in general the analysis suggests a potentially important role for a consumption tax as part of an overall optimal fiscal package

dynamic analysis of an endogenous growth model with public capital this paper develops an endogenous growth model with productive public capital along with private capital in a spirit similar to that of r j barro 1990 since the authors model includes two stock variables it has transitional dynamics unlike most of the previous studies on endogenous growth including barro s where concerns are restricted to the steady state analysis first they show that the transitional path is unique and stable second the character of the transitional path is explored third the authors show that the optimal tax rate is smaller than the rate that maximizes the national growth rate with a log linear utility function copyright 1993 by the editors of the scandinavian journal of economics

tax evasion and the allocation of capital abstract the efficiency cost of capital misallocations between the corporate sector and the noncorporate sector is typically measured using statutory tax differences corporate source income tax compliance is high because of third party reporting however while noncorporate rental income tax compliance is low differential evasion thus exacerbates statutory differences and enlarges the efficiency cost to measure this effect we build a numerical general equilibrium model where households simultaneously choose portfolios of risky assets and fractions of income to report