Long-run growth effects of taxation in a non-scale growth model with innovation

Zeng, Jinli; Zhang, Jie

doi:10.1016/s0165-1765(02)00006-x

Cited by 23 publications

(18 citation statements)

References 20 publications

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“…See Jones [11], Aghion and Howitt [1,2], Peretto and Smulders [18], and Laincz and Peretto [13] for reviews of the various approaches and of the empirical evidence. Zeng and Zhang [21] and Peretto [16] study the implications of the elimination of the scale effect for tax policy but consider steady states only and ignore welfare.…”

Section: Introductionmentioning

confidence: 99%

Corporate taxes, growth and welfare in a Schumpeterian economy

Peretto

2007

Journal of Economic Theory

108

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I take a new look at the long-run implications of taxation through the lens of modern Schumpeterian growth theory. I focus on the latest vintage of models that sterilize the scale effect through a process of product proliferation that fragments the aggregate market into submarkets whose size does not increase with the size of the workforce. I show that the following interventions raise welfare: (a) granting full expensibility of R&D to incorporated firms; (b) eliminating the corporate income tax and/or the capital gains tax; (c) reducing taxes on labor and/or consumption. What makes these results remarkable is that in all three cases the endogenous increase in the tax on dividends necessary to balance the budget has a positive effect on growth. A general implication of my analysis is that corporate taxation plays a special role in Schumpeterian economies and provides novel insights on how to design welfare-enhancing tax reforms.

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Section: Introductionmentioning

confidence: 99%

Corporate taxes, growth and welfare in a Schumpeterian economy

Peretto

2007

Journal of Economic Theory

108

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“…Zeng and Zhang (2002) show that the long-run growth rate is independent of labor income tax and consumption tax but decreasing in capital income tax. In contrast, Lin and Russo (1999) analyze how the taxation of di¤erent sources of capital income a¤ects long-run growth and …nd that a higher capital income tax rate for innovative …rms could be growth-enhancing if the tax system permits tax credits for R&D spending.…”

Section: Introductionmentioning

confidence: 91%

“…2 Recently, R&D-based growth models pioneered by Romer (1990) and Aghion and Howitt (1992) have been used to explore the interrelation between capital taxation, innovation and economic growth; see e.g., Lin and Russo (1999), Zeng and Zhang (2002), Haruyama and Itaya (2006) and Aghion et al (2013). This note contributes to the literature by providing an analysis of both the short-run and long-run e¤ects of capital taxation on innovation and economic growth within the seminal innovation-driven growth model in Romer (1990), which is a workhorse model in R&D-based growth theory.…”

Section: Introductionmentioning

confidence: 99%

Short-run and long-run effects of capital taxation on innovation and economic growth

Chen

Chu

et al. 2017

Journal of Macroeconomics

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In this note, we examine the e¤ects of capital taxation on innovation and economic growth. We …nd that capital taxation has drastically di¤erent e¤ects in the short run and in the long run. An increase in the capital income tax rate has both a consumption e¤ect and a tax-shifting e¤ect on the equilibrium growth rates of technology and output.In the long run, the tax-shifting e¤ect dominates the consumption e¤ect yielding an overall positive e¤ect of capital taxation on steady-state economic growth. However, in the short run, the consumption e¤ect becomes the dominant force causing an initial negative e¤ect of capital taxation on the equilibrium growth rates. These contrasting e¤ects of capital taxation at di¤erent time horizons may provide a plausible explanation for the mixed evidence in the empirical literature on capital taxation and economic growth.

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“…Tremblay (2010) adds that if the investment in human capital is performed both by employee and corporation, the level of the investment in human capital will increase in the case of higher taxation of personal income; conversely the effect of corporate taxes is opposite. Zeng and Zhang (2001) study the growth effect of taxes within Howitt's (1999) growth model where the main sources of growth is innovation. They conclude that tax of capital income is harmful for growth as it discourages creation of savings and capital investments.…”

Section: The Impact Of Taxation On Economic Growth -Current State Of mentioning

confidence: 99%

Affects Corporate Taxation Economic Growth? - Dynamic Approach for OECD Countries

Nálepová¹

2017

EJOBSAT

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This contribution deals with issues of corporate taxation in relation with economic growth. Its main objective is to quantify and analyse the relation of corporate taxation and economic growth using of OECD countries. The corporate tax rate is approximated by effective corporate tax rates such as corporate tax quota, marginal effective and average tax rates as determined by micro-forward looking approach and the alternative approach World Tax Index. The relation of taxation and economic growth is verified using an econometric model based on panel regression methods and tests using a dynamic panel. The model has shown a negative impact on economic growth for all six of the selected corporate tax approximators under the assumed significant level. A quantitatively higher negative impact has been verified in the case of labour taxation.

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Long-run growth effects of taxation in a non-scale growth model with innovation

Cited by 23 publications

References 20 publications

Corporate taxes, growth and welfare in a Schumpeterian economy

Corporate taxes, growth and welfare in a Schumpeterian economy

Short-run and long-run effects of capital taxation on innovation and economic growth

Affects Corporate Taxation Economic Growth? - Dynamic Approach for OECD Countries

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