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Optimal taxation in an endogenous growth model with variable population and public expenditure
Author(s) -
Renström Thomas I.,
Spataro Luca
Publication year - 2021
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12515
Subject(s) - economics , endogenous growth theory , normative , public expenditure , debt , capital income , optimal tax , human capital , population , public spending , public capital , public finance , microeconomics , public economics , fiscal policy , monetary economics , macroeconomics , international taxation , tax reform , public investment , economic growth , philosophy , law , sociology , epistemology , political science , demography , politics
In this paper we analyze second‐best optimal taxation in an endogenous‐growth model driven by public expenditure, in presence of endogenous fertility and labor supply. Normative analysis shows positive taxes on the number of children, which are necessary to correct for congestion in the publicly provided input (such as education and healthcare), negative public debt. Results on capital and labor income taxation depend on whether the public input is optimally provided.