Public Services, Welfare, and Growth under Baumol's Cost Disease

Hiroaki Sasaki and Aya Mizutani

MPRA Paper from University Library of Munich, Germany

Abstract: This study presents a three-sector growth model that consists of manufacturing, private services, and public services, and examines the relationship between sectoral compositions and the tax rate. We identify an optimal tax rate that maximizes instantaneous utility. The optimal tax rate increases as manufacturing productivity increases, though it converges to a certain level that is less than unity.

Keywords: public services; cost disease; optimal tax rate; growth disease (search for similar items in EconPapers)
JEL-codes: H21 H40 H50 O14 O41 (search for similar items in EconPapers)
Date: 2024-08-12
New Economics Papers: this item is included in nep-gro, nep-pbe and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:121693

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