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Nonlinear Tax Structures and Endogenous Growth

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  • Steven Yamarik

Abstract

The growth implications of a nonlinear tax structure are investigated. The interest here is on the distortionary not the redistributive effects of taxation on economic growth. The study finds two results. First, the inclusion of a nonlinear tax structure into an Ak growth model introduces the convergence behavior of the neoclassical growth model while retaining the steady‐state growth properties of the Ak model. Second, a tax structure that is more progressive through time will lower the transitional growth rate and raise the speed of convergence. Therefore, it is suggested that the tax structure may be another source of observed differences in per capita growth rates.

Suggested Citation

  • Steven Yamarik, 2001. "Nonlinear Tax Structures and Endogenous Growth," Manchester School, University of Manchester, vol. 69(1), pages 16-30, January.
    • Handle: RePEc:bla:manchs:v:69:y:2001:i:1:p:16-30
    DOI: 10.1111/1467-9957.00232
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    Cited by:

    1. Censolo, Roberto & Colombo, Caterina, 2008. "Public consumption composition in a growing economy," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1479-1495, December.
    2. Shu-Hua Chen & Jang-Ting Guo, 2019. "Progressive taxation as an automatic destabilizer under endogenous growth," Journal of Economics, Springer, vol. 127(1), pages 47-71, June.
    3. Chetan Ghate, 2005. "Transitional dynamics in a growth model with distributive politics," Discussion Papers 05-07, Indian Statistical Institute, Delhi.
    4. Wenli Li & Pierre-Daniel G. Sarte, 2001. "Growth Effects of Progressive Taxation," Finance and Economics Discussion Series 2002-03, Board of Governors of the Federal Reserve System (U.S.).
    5. Gómez Manuel A., 2010. "Endogenous Growth, Habit Formation and Convergence Speed," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-32, January.
    6. Chen, Shu-Hua, 2019. "On economic growth and automatic stabilizers under linearly progressive income taxation," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 378-395.
    7. Lai, Ching-Chong & Liao, Chih-Hsing, 2012. "Optimal nonlinear income taxation with productive government expenditure," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 66-77.
    8. Juniours Marire & Tafirenyika Sunde, 2012. "Economic growth and tax structure in Zimbabwe: 1984-2009," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 5(2), pages 105-121.
    9. Shu‐Hua Chen & Jang‐Ting Guo, 2018. "On Indeterminacy and Growth under Progressive Taxation and Utility‐Generating Government Spending," Pacific Economic Review, Wiley Blackwell, vol. 23(3), pages 533-543, August.
    10. Shu-Hua Chen & Jang-Ting Guo, 2016. "Progressive Taxation, Endogenous Growth, And Macroeconomic (In)Stability," Bulletin of Economic Research, Wiley Blackwell, vol. 68(S1), pages 20-27, December.
    11. Shu‐Hua Chen & Jang‐Ting Guo, 2013. "On indeterminacy and growth under progressive taxation and productive government spending," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(3), pages 865-880, August.

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