Tax Structure, Growth and Welfare in the UK

Konstantinos Angelopoulos and Jim Malley

No 2008-18, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: This paper studies the quantitative implications of changes in the composition of taxes for long-run growth and expected lifetime utility in the UK economy over 1970-2005. Our setup is a dynamic stochastic general equilibrium model incorporating a detailed scal policy struc- ture, and where the engine of endogenous growth is human capital accumulation. The government s spending instruments include pub- lic consumption, investment and education spending. On the revenue side, labour, capital and consumption taxes are employed. Our results suggest that if the goal of tax policy is to promote long-run growth by altering relative tax rates, then it should reduce labour taxes while simultaneously increasing capital or consumption taxes to make up for the loss in labour tax revenue. In contrast, a welfare promoting policy would be to cut capital taxes, while concurrently increasing labour or consumption taxes to make up for the loss in capital tax revenue.

Keywords: Fiscal policy; Economic growth; Welfare (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Tax structure, growth, and welfare in the UK (2012)
Working Paper: Tax Structure, Growth and Welfare in the UK (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:sirdps:31

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