Seminar Papers, Institute for International Economic Studies, Stockholm University
On Analytics of the Dynamic Laffer Curve
() and Mats Persson
Abstract: In this paper, we analyze government budget balance within
a simple model of endogenous growth. For the AK model, simple analytical
conditions for a tax cut to be self-financing can be derived. The critical
variable is not the tax rate per se, but the "transfer-adjusted tax rate".
We discuss some conceptual issues in dynamic revenue analysis, and we
explain why previous studies have arrived at seemingly contradictory
results. Finally, we perform an empirical study of the transfer-adjusted
tax rates of the OECD countries to see which country has the highest
potential for fiscal improve-ments; it turns out that only a few countries
have any potential for such "dynamic scoring".
Keywords: Laffer effects; intertemporal models; dynamic scoring; growth models; (follow links to similar papers)
JEL-Codes: E62; O41; (follow links to similar papers)
33 pages, April 18, 2000
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- This paper is forthcoming as:
Agell, Jonas and Mats Persson, 'On Analytics of the Dynamic Laffer Curve', Journal of Monetary Economics.
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