Growth Effects of Income and Consumption Taxes : Positive and Normative Analysis

Author/Editor:

Gian M Milesi-Ferretti ; Nouriel Roubini

Publication Date:

July 1, 1995

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The effects of income and consumption taxation are examined in the context of models in which the growth process is driven by the accumulation of human and physical capital. The different channels through which these taxes affect economic growth are discussed, and it is shown that in general the taxation of factor incomes (human and physical capital) is growth-reducing. The effects of consumption taxation on growth depend crucially on the elasticity of labor supply, and therefore on the specification of the leisure activity. The paper also derives some implications for the optimal intertemporal choice of tax instruments.

Series:

Working Paper No. 95/62

English

Publication Date:

July 1, 1995

ISBN/ISSN:

9781451848236/1018-5941

Stock No:

WPIEA0621995

Format:

Paper

Pages:

38

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