Optimal nonlinear income taxation with productive government expenditure

Ching Chong Lai, Chih Hsing Liao

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

This paper develops an endogenous growth model with a production externality and nonlinear income taxation, and uses it to examine how the fiscal authority devises its nonlinear tax structure from the viewpoint of welfare maximization. It is found that, in the Barro (1990) model, Pareto optimality can be achieved if both policy instruments for the tax scalar and the extent of the tax progressivity/regressivity are set optimally.

Original languageEnglish
Pages (from-to)66-77
Number of pages12
JournalInternational Review of Economics and Finance
Volume22
Issue number1
DOIs
StatePublished - Apr 2012

Keywords

  • Endogenous growth
  • Nonlinear income taxation
  • Optimal taxation

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