Optimal nonlinear income taxation with productive government expenditure

Ching-chong Lai and Chih-Hsing Liao

International Review of Economics & Finance, 2012, vol. 22, issue 1, 66-77

Abstract: This paper develops an endogenous growth model with a production externality and nonlinear income taxation, and uses it to examine how the fiscal authority devises its nonlinear tax structure from the viewpoint of welfare maximization. It is found that, in the Barro (1990) model, Pareto optimality can be achieved if both policy instruments for the tax scalar and the extent of the tax progressivity/regressivity are set optimally.

Keywords: Nonlinear income taxation; Optimal taxation; Endogenous growth (search for similar items in EconPapers)
JEL-codes: E62 H21 O41 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:22:y:2012:i:1:p:66-77

DOI: 10.1016/j.iref.2011.08.009

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