This paper studies growth and welfare effects of fiscal policy in an endogenous growth model with productive public capital where we consider both distortionary and non-distortionary taxation in the model simultaneously. Analyzing the model it is assumed that the economy originally is on the balanced growth path when the government changes its fiscal parameters. The paper then studies growth an...

This paper presents a New Economic Geography model with distortionary taxation and endogenized trade costs. Tax revenues finance a public good, infrastructure. We show that the introduction of costly public investment in infrastructure increases agglomerative tendencies. With respect to the regions’ sizes, in the periphery, the price-index for manufacturing goods decreases, whereas for the core...

We utilize a simple overlapping generations model with a balanced budget rule to study the effect of distortionary taxation on cycles and local stability of equilibria. We show that under proportional taxation there is a critical tax rate above which cycles will vanish, while in the case of linearly progressive taxation there is a critical level of exemption below which cycles will vanish as we...

This paper studies voting over quadratic taxation when income is fixed and taxation non distortionary. We first show that, if a Condorcet winner (a tax function preferred by a majority to any other feasible tax function) exists, it involves maximum progressivity. We then give necessary and sufficient conditions on the income distribution for a Condorcet winner to exist, and show numerically tha...

This paper derives a version of the Samuelson rule, which takes not only the marginal costs of public funds into account but also the desirability of preference revelation. Under a linear income tax more able individuals suffer from a larger utility loss if taxes are raised to cover the cost of public good provision. This implies that these individuals are tempted to understate their valuation ...

I study the effects of long-run inflation and income taxation in an economy where households face uninsurable idiosyncratic risks. I construct a tractable competitive search framework that generates dispersion of prices, income and wealth. I analytically characterize the stationary equilibrium and the policy effects on individual choices. Quantitative analysis finds that monetary and fiscal pol...