Equilibrium Dynamics in a Two-Sector Model with Taxes

ASU Economics Working Paper No. 13/2001

29 Pages Posted: 7 Aug 2001

See all articles by Salvador Ortigueira

Salvador Ortigueira

European University Institute - Economics Department (ECO)

Manuel Santos

Arizona State University (ASU) - Economics Department

Date Written: April 2001

Abstract

In this paper we are concerned with the equilibrium dynamics of a two-sector model of endogenous growth with distortionary taxes. We show that for certain parameters values and tax schemes every equilibrium orbit--except the steady state solution--is non-interior; i.e., there are times in which one of the sectors is inactive. This analysis confirms that in multisector models the set of easily checkable, universal conditions that can guarantee the interiority of equilibrium solutions is rather limited.

Keywords: distortionary taxes, competitive equilibrium, dynamic instability, non-interior equilibrium orbit

JEL Classification: D90, E22

Suggested Citation

Ortigueira, Salvador and Santos, Manuel, Equilibrium Dynamics in a Two-Sector Model with Taxes (April 2001). ASU Economics Working Paper No. 13/2001, Available at SSRN: https://ssrn.com/abstract=275976 or http://dx.doi.org/10.2139/ssrn.275976

Salvador Ortigueira (Contact Author)

European University Institute - Economics Department (ECO) ( email )

Villa San Paolo
Via della Piazzuola 43
50133 Florence
Italy

Manuel Santos

Arizona State University (ASU) - Economics Department ( email )

Tempe, AZ 85287-3806
United States
(480) 965-0748 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
86
Abstract Views
799
rank
318,225
PlumX Metrics