Year: 2004
Type: report
Abstract: This paper uses the neoclassical growth model to examine the extent to which a tax cut pays for itself through higher economic growth.The model yields simple expressions for the steady-state feedback effect of a tax cut.The feedback is surprisingly large: for standard parameter values, half of a capital tax cut is self-financing.The paper considers various generalizations of the basic model, including elastic labor supply departures from infinite horizons, and non-neoclassical production settings.It also examines how the steady-state results are modified when one considers the transition path to the steady state.
DOI: 10.3386/w11000
Authors: N. Gregory Mankiw, Matthew Weinzierl
Institution: Harvard University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3122940786