Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/155242
Authors: 
Petrucci, Alberto
Year of Publication: 
2001
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 79.2001
Abstract: 
This article studies the implications of consumption taxation on capitalaccumulation in a one-sector endogenous growth model with finite horizons. A tax on consumption, when tax revenues are lump-sum rebated to consumers, redistributes income between living generations and future, still unborn, generations, and therefore depresses aggregate consumption and raises saving, stimulating capital accumulation and economic growth. If however the resources from taxation are used for financing unproductive public spending, the effect of the consumption tax on the endogenous growth rate disappears as no intergenerational redistribution of income occurs. Finally, a consumption tax hike accompanied by a compensatory reduction of public debt increases long-run economic growth and reduces the consumption-output ratio. Our results on consumption taxation differ substantially from those obtained within the endogenous growth literature.
Subjects: 
Consumption tax
endogenous growth
overlapping generations
JEL: 
H24
O41
Document Type: 
Working Paper

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