Optimal Taxation and Growth with Public Goods and Costly Enforcement

Pierre-Richard Agénor () and Kyriakos C. Neanidis ()

Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The Univeristy of Manchester

Abstract: This paper studies optimal direct and indirect taxation rules in an endogenous growth framework where public goods, in the form of infrastructure and health services, affect both production and household utility. Growth- and welfare-maximizing rules are first derived in a setting where collection costs are absent. The analysis is then extended to consider the case where tax collection is costly. Optimal tax rules are derived under alternative assumptions about the nature of these costs. The possibility of multiple equilibria is examined, together with the joint determination of the tax structure and the share of public spending on tax enforcement.

New Economics Papers: this item is included in nep-pbe and nep-pub
Date: 2007
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Persistent link: http://EconPapers.repec.org/RePEc:man:cgbcrp:89

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