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Growth and welfare maximization in models of public finance and endogenous growth

Florian Misch, Norman Gemmell () and Richard Kneller ()

No 11-041, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: This paper evaluates the trade-off between growth and welfare maximization from two perspectives. Firstly, it synthesizes and extends endogenous growth models with public finance to compare growth and welfare maximizing tax rates. Secondly, it examines the distinct model outcomes in terms of their growth rates and welfare levels. This comparison highlights the range of trade-offs: the growth maximizing tax rate can be above, below, or equal to the welfare maximizing equivalent. We find however that even relatively large differences in growth and welfare maximizing tax rates translate into relatively small differences in growth rates, and, in some cases, welfare levels.

Keywords: Economic Growth; Productive Public Spending; Optimal Fiscal Policy (search for similar items in EconPapers)
JEL-codes: E62 H21 H50 O40 (search for similar items in EconPapers)
Date: 2011
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https://www.econstor.eu/bitstream/10419/48159/1/663765218.pdf (application/pdf)

Related works:
Journal Article: Growth and Welfare Maximization in Models of Public Finance and Endogenous Growth (2013) Downloads
Working Paper: Growth and Welfare Maximization in Models of Public Finance and Endogenous Growth (2008) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:11041

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