Author

  • Wei-Bin Zhang

    • Ritsumeikan Asia Pacific University, Japan
    • Japan

Abstract

This paper makes an original contribution to the literature of optimal taxation by introducing Ramsey taxation to the Solow-Uzawa growth model to examine genuine dynamic interdependence between growth and optimal taxation. We introduce a public sector to the Uzawa two-sector growth model. The public sector supplies public goods and services. The government financially supports by the public sector by collecting taxes on the household’s wage income and wealth income under the assumption that the utility level is maximized. We derive the optimal taxation rule and construct the dynamics of the national economy. The model studies a nonlinear dynamics between national and sectoral growth, economic structural change, wealth/capital accumulation, and optimal tax rates in perfect competitive markets with the government intervention. The model has a unique stable equilibrium point with the chosen parameter values. We carry out comparative dynamic analysis to analyze effects of exogenous changes in a few parameters on the transitional process and long-term economic structure of the economic dynamics.

Keywords

References

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How to Cite

Zhang, W.-B. (2020). Optimal Taxation in the Solow-Uzawa Growth Model with Public Goods. Journal of Social and Development Sciences, 10(3(S), 1-11. https://doi.org/10.22610/jsds.v10i3(S).2980

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Section

Research Paper

Published in

Vol. 10 No. 3(S) (2019) Policy, Public Health & Higher Education View issue contents

Published

2020-01-10

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