Optimal Taxation in the Endogenous Growth Framework with the Private Information

Lu Guo () and Chong Yan

MPRA Paper from University Library of Munich, Germany

Abstract: Differing from taxes of the new dynamic public finance theory without growth, our paper setups an endogenous growth model with the public finance sector which levies heterogeneous non-linear income taxes and linear flat-rate tax on gross outputs to guarantee the optimal investment in the public goods accumulation. Each taxation has individual effect: heterogeneous non-linear income taxes are used to keep standard Euler equation hold; flat-rate tax is used to compensate for the fiscal gap. The paper firstly makes the growth rate endogenous, and show there is a unique steady state growth rate for every aggregate variable by keeping assumptions of the dynamic general equilibrium theory unchangeable. We further prove the growth must exist when externalities are provided by public finance sector. The steady state growth rate can be expressed by coefficients, and the steady state intertemporal relationships of aggregate variables help us simplify simulation equations and calculations on endogenous heterogeneous non-linear income taxes in infinite periods.

Keywords: endogenous tax; public finance; growth; uniqueness (search for similar items in EconPapers)
JEL-codes: E6 H21 O41 (search for similar items in EconPapers)
Date: 2021-07-16
New Economics Papers: this item is included in nep-dge, nep-gro, nep-isf, nep-mac, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/109548/1/MPRA_paper_109548.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:109548

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().