Abstract
AbstractWe devise an endogenous growth model with private and public physical capital, and human capital, which allows for relative and absolute congestion. According to empirical evidence, long‐run growth is invariant to fiscal policy. Despite its complexity, the dynamics of the market economy and the centralized economy are analyzed in detail. We show that an increase in absolute congestion reduces the long‐run growth rate of output. In contrast, relative congestion does not affect long‐run growth. In the absence of congestion, it is optimal to use lump‐sum taxation, and with congestion it is optimal to also tax income.
Full Text
Submitted Version (
Free)
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call