Year: 2013
Type: article
Abstract: This note reexamines the growth effects of commodity taxation and a manufacturing subsidy.By incorporating endogenous labor supply into a variety expansion model following Grossman and Helpman (1991), we derive new results.First, if households consider leisure to be important, an increase in the commodity tax rate can decrease the growth rate in the short run.Second, a small elasticity of substitution and a small manufacturing subsidy halt economic growth.Third, when the elasticity of substitution is small and sustained growth is possible, a decrease in the subsidy raises the short-run growth rate and decreases the long-run growth rate.
Author: Kunihiko Konishi
Institution: The University of Osaka
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2206251730