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Taxes, the Speed of Convergence, and Implications for Welfare Effects of Fiscal Policy

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  • Benjamin Russo

Abstract

Previous studies suggest that income taxes do not affect the convergence speed in neoclassical and new growth models. Those studies use very simple tax structures. This paper shows that a relation between taxes and convergence speed emerges if tax benefits are included in standard macroeconomic models. A welfare example suggests that the economic impact could be large even if the absolute size of the effect of taxes on convergence speed is small.

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  • Benjamin Russo, 2002. "Taxes, the Speed of Convergence, and Implications for Welfare Effects of Fiscal Policy," Southern Economic Journal, John Wiley & Sons, vol. 69(2), pages 444-456, October.
    • Handle: RePEc:wly:soecon:v:69:y:2002:i:2:p:444-456
    DOI: 10.1002/j.2325-8012.2002.tb00502.x
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