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Endogenous Growth, Taxes and Government Spending: Theory and Evidence

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  • Zulal S. Denaux

Abstract

This paper provides a theoretical and empirical investigation of the simultaneous effects of taxes and government spending on long‐run economic growth in an endogenous growth framework. A two‐sector model is considered: one sector produces physical output and the other produces human capital. Government expenditure is divided into several categories, and several types of taxes are included. The property tax is especially interesting because it is a major source of revenue for local government. The theoretical model is estimated using annual panel data from North Carolina counties. This study finds that state‐level fiscal policies affect economic growth but county‐level fiscal policies do not.

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  • Zulal S. Denaux, 2007. "Endogenous Growth, Taxes and Government Spending: Theory and Evidence," Review of Development Economics, Wiley Blackwell, vol. 11(1), pages 124-138, February.
    • Handle: RePEc:bla:rdevec:v:11:y:2007:i:1:p:124-138
    DOI: 10.1111/j.1467-9361.2007.00377.x
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    References listed on IDEAS

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    1. Jong–Wha Lee & Robert J. Barro, 2001. "Schooling Quality in a Cross–Section of Countries," Economica, London School of Economics and Political Science, vol. 68(272), pages 465-488, November.
    2. Eric M. Engen & Jonathan Skinner, 1992. "Fiscal Policy and Economic Growth," NBER Working Papers 4223, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Losina PURNASTUTI & Bambang SUPRAYITNO & SUGIHARSONO, 2016. "Does Human Capital Investment Matter For Growth? Evidence From Indonesia During The Fiscal Decentralization Era," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(1), pages 39-49, June.
    2. Nanthakumar LOGANATHAN & Suraya ISMAIL & Dalia STREIMIKIENE & Asan Ali Golam HASSAN & Edmundas Kazimieras ZAVADSKAS & Abbas MARDANI, 2017. "Tax Reform, Inflation, Financial Development And Economic Growth In Malaysia," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 152-165, December.
    3. Richard Funderburg & Timothy J. Bartik & Alan H. Peters & Peter S. Fisher, 2013. "The Impact Of Marginal Business Taxes On State Manufacturing," Journal of Regional Science, Wiley Blackwell, vol. 53(4), pages 557-582, October.
    4. Dan Rickman & Hongbo Wang, 2020. "U.S. State And Local Fiscal Policy And Economic Activity: Do We Know More Now?," Journal of Economic Surveys, Wiley Blackwell, vol. 34(2), pages 424-465, April.
    5. Ross Guest & Anthony Makin, 2013. "Special Issue. Guest Editor: Zhihao Yu," Review of Development Economics, Wiley Blackwell, vol. 17(3), pages 609-626, August.
    6. Zuzana Machova & Igor Kotlan, 2014. "Expenditures on Collective and Individual Services: Discussion on the Classification of Government Expenditures with Regard to their Inclusion into Growth Models," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 4, pages 287-296, December.
    7. Veronika Nálepová, 2017. "Affects Corporate Taxation Economic Growth? - Dynamic Approach for OECD Countries," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 3(2), pages 132-147.
    8. Shu-Hua Chen, 2015. "Fiscal and Monetary Policies in a Transactions-Based Endogenous Growth Model with Imperfect Competition," The Japanese Economic Review, Japanese Economic Association, vol. 66(1), pages 89-111, March.

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