Complete State and Local Fiscal Policy Impacts on Local Economic Growth
Loading...
Authors
Denaux, Zulal S.
Walden, Michael L.
Issue Date
2004
Type
Preprint
Language
en_US
Keywords
Effect of simultaneous changes , Tax rates , K-12 public education , Public spending
Alternative Title
Abstract
What is the net effect of simultaneous changes in tax rates and government spending on economic
growth? This question is both of theoretical interest to economists as well as practical interest to public
decision makers. Our contribution to the question is two-fold. First, we advance the theoretical content by
developing a two-sector endogenous growth model and showing the effects on economic growth of five types
of taxes and three categories of public spending. Second, we empirically apply the model and calculate net
growth impacts of alternative combinations of tax rate and public spending changes. Our results show the net
impacts on growth importantly depend on the tax and spending combination considered. Increasing corporate
income tax rates, regardless of how the revenues are spent, retard economic growth. Upwardly shifting
marginal individual income tax rates with the added funds spent on higher education raises economic growth,
while spending the funds on K-12 public education lowers growth. Finally, simultaneously increasing gas tax
rates and spending on roads raises economic growth.
Description
Citation
Publisher
Valdosta State University
License
Copyright protected. Unauthorized reproduction or use beyond the exceptions granted by the Fair Use clause of U.S. Copyright law may violate federal law.