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Postwar British Economic Growth and the Legacy of Keynes

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  • Cooley, Thomas F
  • Ohanian, Lee E

Abstract

Following John Maynard Keynes's recommendations, Britain taxed capital income at a much higher rate than the United States during the war and for much of the postwar period. This paper presents a quantitative analysis of the policies designed by Keynes using an endogenous growth model and the neoclassical growth model. The implications of tax-smoothing policies are also evaluated. The authors find that the welfare costs of Keynes's policies were very high relative to a tax-smoothing policy and argue that Britain's poor macroeconomic performance in the early postwar period reflects the high tax rates levied on capital income. Copyright 1997 by the University of Chicago.

Suggested Citation

  • Cooley, Thomas F & Ohanian, Lee E, 1997. "Postwar British Economic Growth and the Legacy of Keynes," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 439-472, June.
    • Handle: RePEc:ucp:jpolec:v:105:y:1997:i:3:p:439-72
    DOI: 10.1086/262079
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