Diversity and Economic Growth in a Model with Progressive Taxation

Wei Wang and Richard M. H. Suen

MPRA Paper from University Library of Munich, Germany

Abstract: Is a more heterogeneous population conducive or detrimental to capital accumulation and economic growth? This paper addresses this question using a dynamic general equilibrium model with ex ante heterogeneous consumers and progressive taxation. We show that the answer depends crucially on the shape of the marginal tax function. If this function is concave, then a more heterogeneous population will have a lower average marginal tax rate and a higher level of capital accumulation. The opposite is true when the marginal tax function is convex. These results are robust in a variety of models with either exogenous or endogenous economic growth.

Keywords: Consumer Heterogeneity; Progressive Taxation; Economic Growth (search for similar items in EconPapers)
JEL-codes: D31 E62 (search for similar items in EconPapers)
Date: 2015-10-30
New Economics Papers: this item is included in nep-dge, nep-gro, nep-mac and nep-pbe
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https://mpra.ub.uni-muenchen.de/67569/1/MPRA_paper_67569.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/77354/8/MPRA_paper_77354.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/88376/15/MPRA_paper_88376.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:67569

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