Abstract
In this chapter, we conclude our analysis of fiscal policy in the neoclassical growth model. In Chapter 6, we considered a labour income tax. However, labour income is not the only source of income that is taxed by the government. In this chapter, we consider instead a capital income tax, which is another tax instrument that we commonly observe in reality. In this case, we find that capital income tax is also contractionary by decreasing the accumulation of capital.
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