The first chapter studies the stabilizing role of fiscal policy. We particularly emphasize the role played by the assumption on the use of public expenditure. We find that if wasteful government expenditure is assumed in a two sector growth model then progressive taxation prevails as a stabilizer of belief-driven fluctuations. In an one-sector model, we observe that when a lump-sum transfer is introduced a stabilizing role for regressive income taxation emerges. In addition, we show that with a lump-sum transfer it turns out that the labour and capital income taxes serve in a different way to dampen belief-driven fluctuations. This difference between labour and capital income taxes can also be observed in a growth model with productive government spending. The second chapter demonstrates the optimality of intertemporally-regressive taxation in a Barro-type growth model with decreasing-returns-to-scale and a public consumption good. The constant tax rate that achieves the first-best steady-state decentralizes an excessive rate of growth with lower welfare than the first-best. We find that the use of regressive taxation moves the growth rate closer to that of the first-best, and the optimum tax matches the first-best growth path to a first-order approximation. In the third chapter, we introduce quasi-hyperbolic preferences into the growth model with productive public spending. First, we compare the competitive equilibrium with the first-best equilibrium in a centrally-planned economy. Second, we explore second-best taxation using the Ramsey fiscal policy approach with three different degrees of commitment: full commitment, complete absence of commitment, and one-period partial commitment.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:586667 |
| Date | January 2013 |
| Creators | Jungyeoun, Lee |
| Contributors | Gareth, Myles |
| Publisher | University of Exeter |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://hdl.handle.net/10871/14167 |
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