Effect of the Tax System ON R&D Intensity, Growth, Wages and Consumption Share
Ana Maria Bandeira and
Authors registered in the RePEc Author Service: Manuela F. Magalhães ()
Australian Economic Papers, 2017, vol. 56, issue 4, 271-291
We propose a general equilibrium knowledgeâ€ driven (semiâ€ )endogenousâ€ growth model with horizontal R&D, which is extended to consider two types of labour, skilled and unskilled, and exogenous government expenditure, financed through taxes on financial assets and on labour income, to analyse the implications of the tax system on R&D intensity, economic growth, wage inequality and consumption share in the output. In particular, we show that: (i) taxes have negative influence in the consumption share, being higher the marginal effect of the labourâ€ income tax; (ii) for any given government expenditure share, an increase (a decrease) in financialâ€ assets tax decreases (increases) the labourâ€ income tax; (iii) only the financialâ€ assets tax affects negatively the R&D intensity and the skillâ€ premium; thus, to reduce the skillâ€ premium the financialâ€ assets tax must increase; (iv) ignoring the effect on wage inequality and on R&D intensity, taxes are substitutes.
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ausecp:v:56:y:2017:i:4:p:271-291
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