GROWTH EFFECTS OF CONSUMPTION AND LABOR-INCOME TAXATION IN AN OVERLAPPING-GENERATIONS LIFE-CYCLE MODEL

Ben Heijdra () and Jochen Mierau

Macroeconomic Dynamics, 2010, vol. 14, issue S2, 151-175

Abstract: We study labor-income and consumption taxation in an overlapping-generations model featuring endogenous growth due to interfirm investment externalities. Consumption, saving, and labor supply display life-cycle features because mortality and labor productivity are age-dependent and because annuity markets may be imperfect. The government's method of revenue recycling critically affects the growth consequences of taxation. Purely consumptive government spending has a negative impact on growth. Redistribution of tax revenue from dissavers to savers may lead to an increase in growth due to beneficial intergenerational transfer effects.

Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:14:y:2010:i:s2:p:151-175_00

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