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PUBLIC CAPITAL, TAXATION AND ENDOGENOUS GROWTH IN A FINITE HORIZONS MODEL
Author(s) -
Tamai Toshiki
Publication year - 2009
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.2008.00339.x
Subject(s) - economics , endogenous growth theory , life expectancy , public capital , growth model , welfare , capital (architecture) , macroeconomics , capital income , overlapping generations model , fiscal policy , monetary economics , public economics , international taxation , human capital , tax reform , market economy , public investment , history , population , demography , archaeology , sociology
This paper presents development of an endogenously growing finite horizons model with public capital, and investigates macroeconomic effects of fiscal policy and a change in life expectancy. Specifically regarding novel results, a growth‐maximizing income tax rate exists that is less than the elasticity of public capital to output. In addition, in the model with income tax financing, there might exist an inverted‐U‐shaped relationship between life expectancy and growth, which is consistent with some empirical evidence. In this paper, we elucidate the interaction among public capital accumulation, taxes, growth, welfare and life expectancy.