Government expenditure, taxation and long-run growth

Chengliang Yan () and Liutang Gong
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Chengliang Yan: School of Economics, Central University of Finance and Economics, Beijing 100081, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2009, vol. 4, issue 4, 505-525

Abstract: This paper assesses the effect of fiscal policy on economic growth in an AK model with endogenous labor supply. It is found that the structure of taxation and government expenditure could affect the long-run growth rate through their effect on households’ labor-leisure choice, saving-consuming choice and the proportion of government expenditure to GDP. Barro’s (1990) plausible result that the growth rate and the income tax rate have an inverted-U relationship does not always hold. In addition, based on the panel data of 31 provinces from 1997 to 2007, we investigate the link between components of government productive expenditure and economic growth. It is found that the productive expenditure does not always have a positive effect on the growth rate, and its effect exhibits regional differences. The reason is that there is an excess amount of the government productive expenditure in China or the efficiency of the government productive expenditure may be too low.

Keywords: economic growth; fiscal policy; taxation; government expenditure (search for similar items in EconPapers)
JEL-codes: E62 H20 O40 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (10)

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http://journal.hep.com.cn/fec/EN/10.1007/s11459-009-0027-y (application/pdf)

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Journal Article: Government expenditure, taxation and long-run growth (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:fec:journl:v:4:y:2009:i:4:p:505-525

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