Public capital, endogenous growth, and endogenous fluctuations

Factor income taxation, growth, and investment specific technological change

“…In particular, we choose two values of = f0:5; 0:7g. Given the other parameter values, Figure (4) shows that an increase in from 0:5 to 0:7 increases the growth maximizing tax rate, which is expected, as seen in proposition (1). The plot shifts upward and skews to the right because an increase in from 0:5 to 0:7 reduces the optimal allocation towards n 2 which leads to a reduction in the growth rate for initially lower values of .…”

“…Greenwood et al (1997Greenwood et al ( , 2000 show that once the falling price of real capital goods is taken into account, this explains most of the observed growth in output in the US, with relatively little being left over to be explained by total factor productivity. 4 Hu¤man (2008) builds a neoclassical growth model with investment speci…c technological change. Labor is used in research activities in order to increase investment speci…c technological change.…”

“…In addition, we assume that the presence of labor and aggregate private capital externalities also a¤ect investment speci…c technological change. This assumption is motivated by Greenwood et al (1997), who show that the real price of capital equipment in the US -since 4 Other authors, such as Gort et al (1999) distinguish between equipment speci…c technological change and structure speci…c technological change. These authors show that 15% of US economic growth rate can be attributed to structure speci…c technological change in the post war period, while equipment-speci…c technological progress accounts for 37% of US growth.…”

“…Typically, the public input is seen as directly a¤ecting …nal production -either as a stock or a ‡ow (e.g., see Futagami, Morita, and Shibata (1993), Chen (2006), Fischer andTurnovsky (1997, 1998), and Eicher and Turnovsky (2000)). Instead, we assume that the public input facilitates investment speci…c technological change.…”

Progressive taxation and macroeconomic (in)stability with utility-generating government spending

“…2 In particular, whether private and public consumption expenditures enter the household's utility function as Edgeworth complements or substitutes may affect the model's local dynamics. Recent work in this area includes Cazzavillan (1996), Zhang (2000), Raurich (2003), Fernández et al (2004), Chen (2006), Guo and Harrison (2008), Lloyd-Braga et al (2008), Hori and Maebayashi (2013), among others. Building upon these existing studies, we consider a prototypical one-sector real business cycle (RBC) model with two prevalent features observed in developed economies: progressive income taxation equilibrium (in)determinacy.…”