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Capital Taxation, Growth, and Non-renewable Resources

Author

Listed:
  • Christian Groth

    (Institute of Economics, University of Copenhagen)

  • Poul Schou

    (Danish Rational Economic Agents Model (DREAM))

Abstract

The conventional view within the endogenous growth literature is that interest income taxes impede economic growth and investment subsidies promote economic growth. The present paper lays out a simple framework to see whether this is still true when non-renewable resources enter the ”growth engine” in an essential way. It is not! The framework allows a rich set of determinants of longrun growth, including some fiscal policy measures, but interest income taxes and investment subsidies are not among these. The results not only contrast with the modern literature on taxes and endogenous growth, but also with observations in the literature from the 1970’s on non-renewable resources and taxation - observations which were not based on general equilibrium considerations.

Suggested Citation

  • Christian Groth & Poul Schou, 2004. "Capital Taxation, Growth, and Non-renewable Resources," EPRU Working Paper Series 04-16, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:epruwp:04-16
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    File URL: http://web.econ.ku.dk/epru/files/wp/wp-04-16.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Andre, Francisco J. & Cerda, Emilio, 2005. "On natural resource substitution," Resources Policy, Elsevier, vol. 30(4), pages 233-246, December.

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    More about this item

    Keywords

    non-renewable resources; endogenous growth; greenhouse effect; taxes; subsidies;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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