Fiscal policy under a minimun-time objetive Darong Dai
By: Dai, Darong
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Material type: 
ArticlePublisher: 2018Subject(s): POLITICA FISCAL | DESARROLLO ECONOMICO | MODELOS ECONOMETRICOSOnline resources: Click here to access online
In:
Scottish Journal of Political Economy v. 65, n. 3, July 2018, p. 293-314Summary: In an endogenous growth model, we characterize the fiscal policy driven by a minimum-time objective of economic development. We find that in equilibrium government should levy the highest possible consumption taxes, reduce public
expenditures to the lowest possible level, and keep labor income tax rate and capital income tax rate satisfy a substitution relationship at the balanced budget constraint. We also identify the condition under which income tax rate should be set to zero. We further find that the equilibrium fiscal policy is equivalent to the growth-maximizing fiscal policy, whereas it generally deviates from the welfare-maximizing fiscal policy. We hence identify a circumstance where setting the policy goal of reaching an economic-performance target as soon as possible can-not be justified in the sense of maximizing the welfare of households.
| Item type | Current location | Home library | Call number | Status | Date due | Barcode |
|---|---|---|---|---|---|---|
| Artículos | IEF | IEF | OP 564/2018/3-1 (Browse shelf) | Available | OP 564/2018/3-1 |
Disponible también en formato electrónico a través de la Biblioteca del IEF.
Resumen.
Bibliografía.
In an endogenous growth model, we characterize the fiscal policy driven by a minimum-time objective of economic development. We find that in equilibrium government should levy the highest possible consumption taxes, reduce public
expenditures to the lowest possible level, and keep labor income tax rate and capital income tax rate satisfy a substitution relationship at the balanced budget constraint. We also identify the condition under which income tax rate should be set to zero. We further find that the equilibrium fiscal policy is equivalent to the growth-maximizing fiscal policy, whereas it generally deviates from the welfare-maximizing fiscal policy. We hence identify a circumstance where setting the policy goal of reaching an economic-performance target as soon as possible can-not be justified in the sense of maximizing the welfare of households.
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