Equilibrium Dynamics in a Two-Sector Model with Taxes

Manuel Santos () and Salvador Ortigueira ()
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Manuel Santos: W. P. Carey School of Business Department of Economics, http://wpcarey.asu.edu/Directory/stafffaculty.cfm?cobid=1039501

Working Papers from Department of Economics, W. P. Carey School of Business, Arizona State University

Abstract: In this paper we are concerned with the equilibrium dynamics of a two-sector model of endogenous growth with distortionary taxes. We show that for certain parameters values and tax schemes every equilibrium orbit--except the steady state solution--is non-interior; i.e., there are times in which one of the sectors is inactive. This analysis confirms that in multisector models the set of easily checkable, universal conditions that can guarantee the interiority of equilibrium solutions is rather limited.

JEL-codes: D90 E22 (search for similar items in EconPapers)
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Related works:
Journal Article: Equilibrium Dynamics in a Two-Sector Model with Taxes (2002)
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