Factor income taxation, growth, and investment specific technological change

Monisankar Bishnu (), Chetan Ghate and Pawan Gopalakrishnan
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Monisankar Bishnu: Indian Statistical Institute, New Delhi

Discussion Papers from Indian Statistical Institute, Delhi

Abstract: We construct a tractable endogenous growth model with production externalities in which the public capital stock augments investment speci?c technological change. We characterize the ?rst best ?scal policy and show that there exist several labor and capital tax-subsidy combinations that decentralize the planner?s growth rate. The optimal factor income tax mix is therefore indeterminate which gives the planner the flexibility to choose policy rules from a large set. Our model explains why many advanced economies experiencing similar growth rates have widely varying factor income tax rates.

Keywords: Investment Specific Technological Change; Endogenous Growth; Factor Income Taxation; Welfare; First best fiscal policy; Indeterminacy (search for similar items in EconPapers)
JEL-codes: E2 E6 H2 O4 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2013-01
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Journal Article: Factor income taxation, growth, and investment specific technological change (2016)
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