Dynamic Scoring in a Romer-Style Economy

• Autores: Dean Scrimgeour
• Localización: Southern Economic Journal, ISSN 0038-4038, ISSN-e 2325-8012, Vol. 81, Nº. 3, 2015, págs. 697-723
• Idioma: inglés
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• Resumen

  • This article analyzes how changes in tax rates affect government revenue in a Romer-style endogenous growth model. Lower tax rates on financial income (returns to physical capital and intellectual property) are partially self-financing primarily because lower financial income taxes stimulate innovation and enhance labor productivity in the long run. In the baseline calibration, about half of a tax cut is self-financing in the long run, substantially more than in the Ramsey model. The dynamics of the economy s response to a tax cut are very sluggish and, for some variables, nonmonotonic.