Income Taxation, Government Expenditure, and Long-Run Stochastic Growth

Arbeitspapier

This paper employs a stochastic endogenous growth model with productive government expenditure to analyze the macroeconomic effects of income taxation. We demonstrate that in the presence of capital and income risk the impact of taxation on consumption choice as well as on economic growth is ambiguous as it affects the mean as well as the variance of disposable income. We observe that the effects of taxation crucially depend on the degree of risk aversion and on the capital income share. Nevertheless, it is possible to solve for welfare maximizing policies. Compared to the deterministic setting, for the optimal policy design additional conditions have to be met.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Diskussionsbeitrag ; No. 220

Classification and Topics

• Classification: Wirtschaft ; Fiscal Policy
• Subject: Endogenous Growth ; Taxation ; Uncertainty

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Clemens, Christiane
• Event: Veröffentlichung
• (who): Universität Hannover, Wirtschaftswissenschaftliche Fakultät
• (where): Hannover
• (when): 1999

Further information

• Handle: http://hdl.handle.net/10419/78304
• Last update: 10.03.2025, 11:42 AM CET