 Wealth in the utility function, consumption subsidy, and long-run growth and welfareQichun He Journal of Macroeconomics, 2024, vol. 82, issue C Abstract: This paper studies the effect of consumption subsidies on long-run growth and welfare in a Schumpeterian model with the spirit of capitalism (SOC)—wealth in the utility function. It finds that consumption subsidy promotes (reduces) long-run growth and welfare when the spirit of capitalism is weak (strong). By contrast, consumption subsidy has no effect on long-run growth in the Ramsey model of capital accumulation, whereas its effect on the level of consumption and capital stock also depends on the strength of the SOC. Consumption subsidy decreases growth in the AK model with the SOC. In quantitative analysis, we find that when the ratio of consumption subsidy to total consumption increases from 0 to 10%, long-run growth increases by about 0.044 (0.1) percentage points in China (the U.S.), and this effect decreases with the strength of the SOC. Moreover, labor tax, capital tax, and income tax are also studied and compared. Keywords: Consumption subsidy; Spirit of capitalism; Schumpeterian model; Growth and welfare (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:82:y:2024:i:c:s0164070424000582 DOI: 10.1016/j.jmacro.2024.103644 Access Statistics for this article Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos More articles in Journal of Macroeconomics from Elsevier |
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