The Non-monotonic Relationship between Taxation and Long Term Equilibrium in a Model of Endogenous Lifetime and Economic Growth

Ahmad Naimzada and Giorgio Ricchiuti

No 105, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: In this paper, we shed light on the relationship between taxation and steady states by analyzing the OGL model of Chakraborty [2004]. We show that there is (i) a non-monotonic relationship between taxation and growth; (ii) a threshold value of taxation in such a way that there is no effect on the steady state; and finally, (iii) the effect on the two nontrivial steady states is not equal: an increase in tax rate will initially reduce (increase) the unstable (stable) steady state and will then increase (reduce) it.

Keywords: Growth; Longevity; Health; Life Expectancy (search for similar items in EconPapers)
JEL-codes: H51 I12 O1 O41 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2006, Revised 2006
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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:105

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