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

38 Pages Posted: 15 Feb 2006

See all articles by Nouriel Roubini

Nouriel Roubini

New York University - Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: June 1995

Abstract

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.

JEL Classification: E62, O41

Suggested Citation

Roubini, Nouriel, Growth Effects of Income and Consumption Taxes: Positive and Normative Analysis (June 1995). IMF Working Paper, Vol. , pp. 1-34, 1995. Available at SSRN: https://ssrn.com/abstract=883210

Nouriel Roubini

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-0886 (Phone)
212-995-4218 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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