Testing for tax smoothing in a general equilibrium model of growth

Malley, J. , Philippopoulos, A. and Economides, G. (2002) Testing for tax smoothing in a general equilibrium model of growth. European Journal of Political Economy, 18(2), pp. 301-315. (doi:10.1016/S0176-2680(02)00082-4)

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Abstract

This paper constructs, estimates and tests a general equilibrium model of endogenous growth and optimal fiscal policy. Income tax revenues finance government consumption and production services, with the latter generating long-term endogenous growth. A key result from this model is that benevolent policymakers find it optimal to keep the income tax rate constant over time. Despite its popularity amongst theorists, there have been no formal econometric tests of this type of general equilibrium models. We find that data from 22 OECD economies uniformly reject the model over the period 1960–1996.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Philippopoulos, Prof Apostolis and Malley, Professor Jim
Authors: Malley, J., Philippopoulos, A., and Economides, G.
Subjects:H Social Sciences > HB Economic Theory
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:European Journal of Political Economy
ISSN:0176-2680
Published Online:09 April 2002

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