Implications of tax policy for innovation and aggregate productivity growth

Journal Article (Journal Article)

We examine the quantitative implications of income taxation for innovation and aggregate productivity growth within the context of a dynamic stochastic general equilibrium model of innovation-led growth. In the model, innovation comes from entrants creating new products and incumbents improving own existing products. The model embodies key features of the U.S. government sector: (i) an individual income tax with differential treatment of labor income, dividends, and capital gains; (ii) a corporate tax; (iii) a consumption tax; (iv) government purchases. The model is restricted to fit observations for the post-war U.S. economy. Our results suggest that endogenous movements in aggregate productivity and endogenous market structure play a quantitatively important role in the propagation of tax shocks.

Full Text

Duke Authors

Cited Authors

  • Ferraro, D; Ghazi, S; Peretto, PF

Published Date

  • November 1, 2020

Published In

Volume / Issue

  • 130 /

International Standard Serial Number (ISSN)

  • 0014-2921

Digital Object Identifier (DOI)

  • 10.1016/j.euroecorev.2020.103590

Citation Source

  • Scopus