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Output Taxation, Human Capital and Growth

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  • Rosa Capolupo

Abstract

In this paper we investigate the long‐run effects of government spending and taxation in an endogenous growth setting. The model is a variant of Barro’s model (‘Government Expenditure in a Simple Model of Endogenous Growth’, Journal of Political Economy, Vol. 98, 1990, pp. S103–S125) and Lucas’s model (‘On the Mechanics of Economic Development’, Journal of Monetary Economics, Vol. 22, 1988, pp. 3–42) in which human capital accumulation is driven by government spending on public education. To balance the budget the government levies a tax on output in two alternative specifications of the human capital accumulation equation. The results consolidate some recent findings that taxation, when it is used for productive purposes, may lead to faster growth. Growth rates increase with taxes up to a level around 60–70 per cent.

Suggested Citation

  • Rosa Capolupo, 2000. "Output Taxation, Human Capital and Growth," Manchester School, University of Manchester, vol. 68(2), pages 166-183, March.
    • Handle: RePEc:bla:manchs:v:68:y:2000:i:2:p:166-183
    DOI: 10.1111/1467-9957.00188
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    Cited by:

    1. G. Agiomirgianakis & D. Asteriou & V. Monastiriotis, 2002. "Human capital and economic growth revisited: A dynamic panel data study," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 8(3), pages 177-187, August.
    2. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    3. Joost Vandewege & Freddy Heylen, 2005. "Macroeconomics volatility and human capital formation - an empirical analysis," Money Macro and Finance (MMF) Research Group Conference 2005 84, Money Macro and Finance Research Group.
    4. Hosoya, Kei, 2014. "Public health infrastructure and growth: Ways to improve the inferior equilibrium under multiple equilibria," Research in Economics, Elsevier, vol. 68(3), pages 194-207.
    5. repec:ebl:ecbull:v:5:y:2003:i:14:p:1-10 is not listed on IDEAS
    6. Freddy Heylen & Lorenzo Pozzi, 2007. "Crises and human capital accumulation," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1261-1285, November.
    7. Igor Kotlán & Zuzana Machová & Lenka Janíčková, 2011. "Vliv zdanění na dlouhodobý ekonomický růst [Taxation Influence on the Economic Growth]," Politická ekonomie, Prague University of Economics and Business, vol. 2011(5), pages 638-658.
    8. Hosoya, Kei, 2012. "Growth and multiple equilibria: A unique local dynamics," Economic Modelling, Elsevier, vol. 29(5), pages 1662-1665.
    9. Kei Hosoya, 2017. "Accounting for Growth Disparity: Lucas's Framework Revisited," Review of Development Economics, Wiley Blackwell, vol. 21(3), pages 874-887, August.
    10. Hosoya, Kei, 2016. "Recovery from natural disaster: A numerical investigation based on the convergence approach," Economic Modelling, Elsevier, vol. 55(C), pages 410-420.
    11. Tao Jin & Jianhui Zhang, 2011. "Effect of local government expenditure on the ratio of output to capital: Evidence from panel data at China’s provincial level," Frontiers of Economics in China, Springer;Higher Education Press, vol. 6(2), pages 249-270, June.
    12. F. Heylen & L. Pozzi & J. Vandewege, 2004. "Inflation crises, human capital formation and growth," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/260, Ghent University, Faculty of Economics and Business Administration.
    13. Antonio Minniti, 2004. "A note on capolupo's ‘output taxation, human capital and growth’," Manchester School, University of Manchester, vol. 72(3), pages 414-421, June.
    14. John Creedy & Solamz Moslehi, 2010. "The optimal composition of government expenditure among transfers, education and public goods," Hacienda Pública Española / Review of Public Economics, IEF, vol. 194(3), pages 41-64, June.
    15. Igor Kotlán & Zuzana Machová, 2014. "Horizont daňové politiky v zemích OECD [Tax Policy Horizon in the OECD Countries]," Politická ekonomie, Prague University of Economics and Business, vol. 2014(2), pages 161-173.
    16. John Creedy & Norman Gemmell, 2005. "Publicly financed education in an endogenous growth model," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 32(2), pages 114-131, April.
    17. Silvia Bertarelli, 2006. "Public capital and growth," Politica economica, Società editrice il Mulino, issue 3, pages 361-398.
    18. repec:ebl:ecbull:v:15:y:2005:i:11:p:1-9 is not listed on IDEAS
    19. F. Heylen & A. Schollaert & G. Everaert & L. Pozzi, 2003. "Inflation and human capital formation : theory and panel data evidence," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/174, Ghent University, Faculty of Economics and Business Administration.
    20. Dima Bogdan & Dima Ştefana Maria, 2017. "Does Corporate Tax Burden Affect Growth? Evidences from OECD Countries," Journal of Heterodox Economics, Sciendo, vol. 4(2), pages 51-80, December.

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