Tax Structure, Growth and Welfare in the UK

Konstantinos Angelopoulos (), Jim Malley and Apostolis Philippopoulos

Working Papers from Business School - Economics, University of Glasgow

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 fiscal policy structure, and whose engine of endogenous growth is human capital accumulation. The government’s spending instruments include public 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)
JEL-codes: E62 O52 (search for similar items in EconPapers)
Date: 2008-02, Revised 2008-04
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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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:gla:glaewp:2008_05

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