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Effects of Flat-Rate Taxes: to What Extent Does the Leisure Specification Matter?

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  • Manuel Gomez

    (University of A Coruna)

Abstract

This paper explores the implications that the specification of the leisure activity has on the effects of alternative forms of taxation in a two-sector endogenous growth model of the US economy. Growth and welfare effects of tax reforms are shown to depend markedly on the leisure specification. We also compute the optimal tax structure of factor incomes and consumption taxation. The optimal tax rate on capital income is rather robust to the leisure specification. However, the balance between consumption and labor income taxation and the effects of shifting to the optimal tax structure vary considerably across leisure specifications. (Copyright: Elsevier)

Suggested Citation

  • Manuel Gomez, 2003. "Effects of Flat-Rate Taxes: to What Extent Does the Leisure Specification Matter?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(2), pages 404-430, April.
    • Handle: RePEc:red:issued:v:6:y:2003:i:2:p:404-430
    DOI: 10.1016/S1094-2025(03)00008-5
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    1. Creina Day & Garth Day, 2010. "Taxes, Growth And The Current Account Tick‐Curve Effect," Australian Economic Papers, Wiley Blackwell, vol. 49(1), pages 13-27, March.
    2. Creina Day & Garth Day, 2007. "Fiscal Reform, Growth and Current Account Dynamics," ANU Working Papers in Economics and Econometrics 2007-485, Australian National University, College of Business and Economics, School of Economics.
    3. Philip Trostel & Ian Walker, 2006. "Education and Work," Education Economics, Taylor & Francis Journals, vol. 14(4), pages 377-399.
    4. repec:ebl:ecbull:v:8:y:2004:i:1:p:1-8 is not listed on IDEAS
    5. Manuel A. Gómez, 2004. "The effect of the government temporal horizon on the optimal tax structure," Economics Bulletin, AccessEcon, vol. 8(1), pages 1-8.
    6. Barañano, Ilaski & San Martín, Marta, 2020. "On the indeterminacy of equilibrium in an endogenous growth model with non-separable preferences," Mathematical Social Sciences, Elsevier, vol. 108(C), pages 81-89.
    7. Gomez, Manuel A., 2007. "Optimal tax structure in a two-sector model of endogenous growth," Journal of Macroeconomics, Elsevier, vol. 29(2), pages 305-325, June.
    8. Orlando Gomes, 2007. "When Leisure Becomes Excessive: a Bifurcation Result in Endogenous Growth Theory," Notas Económicas, Faculty of Economics, University of Coimbra, issue 26, pages 6-14, December.
    9. Naito, Takumi, 2006. "Tariff and tax reform: Dynamic implications," Journal of International Economics, Elsevier, vol. 68(2), pages 504-517, March.
    10. Gomez Suarez, Manuel A., 2008. "Utility and production externalities, equilibrium efficiency and leisure specification," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1496-1519, December.
    11. Boikos, Spyridon & Bucci, Alberto & Stengos, Thanasis, 2022. "Leisure and innovation in horizontal R&D-based growth," Economic Modelling, Elsevier, vol. 107(C).

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    More about this item

    Keywords

    Tax structure; Endogenous growth; Welfare;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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