1,081 research outputs found
Tax policy and toxic housing bubbles in China
This paper explores the effects of a government tax policy in a growth model with economic transition and toxic housing bubbles applied to China. Such a policy combines taxing entrepreneurs with a one-time redistribution to workers in the same period. Under the tax policy, we find that the welfare improvement for workers is non-monotonic. In particular, there exists an optimal tax at which social welfare is maximized. Moreover, we consider the welfare effects of setting the tax at its optimum. We show that the tax policy can be welfare-enhancing, compare to the case without active policies. The optimal tax may also yield a higher level of welfare than the case even without housing bubbles. Finally, we calibrate the model to China. Our quantitative results show that the optimal tax rate is about 23 percent, and social welfare is significantly improved with such a tax policy
Recommended from our members
The dynamics of corruption and unemployment in a growth model with heterogeneous labour
This paper presents an overlapping generations growth model with heterogeneous labour, endogenous unemployment, and public sector corruption. Unlike most previous studies, the model does not separate public officials and private individuals into two distinct groups. Instead, taking up bureaucratic appointment as a public servant is modelled as an occupational choice, which then allows for the endogenous determination of the proportion of public o¢fficials, the share of corrupt officials among them, and the public investment efficiency of the economy within the dynamic system. Parameterised for Nigeria, the dynamics of endogenous corruption and unemployment, as well as their policy tradeoff, are studied using numerical policy experiments based on relevant themes in the country, which include public sector downsizing and social intervention schemes
Recommended from our members
Modelling the dynamics of corruption and unemployment with heterogeneous labour
This paper presents an endogenous growth model with heterogeneous labour, endogenous unemployment, and public sector corruption. Unlike most previous studies, the model does not separate public officials and private individuals into two distinct groups. Instead, taking up bureaucratic appointment as a public servant is modelled as an occupational choice, which then allows for the endogenous determination of the proportion of public officials, the share of corrupt officials among them, and the public investment efficiency of the economy. The dynamics of endogenous corruption and unemployment are studied using numerical policy experiments based on a stylized representation of a middle-income African economy with high corruption and unemployment. The main finding is that, large-scale public infrastructure push has no effect on raising growth in an economy with high corruption. However, if preceded by social and anti-corruption policies that successfully induce a structural change, it will then be effective in raising growth
Recommended from our members
Equity market performance and public debt: an empirical investigation
While the empirical relationship between public debt and economic growth has been well-researched, there is a gap in terms of understanding the relationship between equity market performance and public debt. Based on propositions derived from a theoretical model and using a quarterly unbalanced panel dataset of 56 economies in the period 1995â2017, we examine this nexus by first estimating a threshold value of public debt above which equity market performance is adversely affected by a change in public debt. After that, the dynamics of equity market performance and change in public debt are examined. We estimate the threshold level to be approximately 17.97 percent of GDP. The short-run and long-run multipliers of a one-percent increase in public debt on equity market returns are 11.57â37.59 and 27.51â78.72 percentage points. These dynamics appear to be different between the economies that are below and above the estimated debt threshold
Recommended from our members
Industrial transformation with heterogeneous labour and foreign experts
This paper develops an endogenous growth model with industrial transformation and a stylised foreign expert-based 'internalisation advantage' framework to determine the composition of heterogeneous foreign multinationals in a developing host economy. A key feature of the model is the introduction of a dichotomous relationship between domestic and foreign firms, where the latter perceives heterogeneity among the productivity of domestic workers. This results in the skills acquisition decision and foreign subsidiaries' operational mode choice to be determined along the same ability distribution of the host economy. This subsequently determines the shares of the di¤erent types of multinationals in a host economy. Parameterised for Malaysia, policy experiments are conducted. A balanced investment liberalisation measure for all foreign firms is found to outperform measure targeting only selected types, though there is a threshold doing-business cost value below which such a standalone FDI-promoting policy does not generate positive growth effect. This then calls for composite programme that maximises the policy complementarities between human capital and FDI-promoting policies
Recommended from our members
Optimal fiscal management in an economy with resource revenueâfinanced governmentâlinked companies
We present a dynamic stochastic general equilibrium (DSGE) model in which a resourceârich government allocates its excess resource rents between a resource stabilization fund and the facilitation of costly domestic fundâraising activities of sovereign wealth funds (SWF), which holds a portfolio of governmentâlinked companies (GLCs). Despite being less productive efficient, GLCs' operation benefits from scale economies tied to the resource sector: its profitability is procyclical to commodity shocks. The model is estimated to Malaysia using the Bayesian approach, with the results suggesting a business cycle heavily influenced by resource shocks. Based on this, we solve numerically for a socially optimal combination of excess resource savings allocation. We find the present allocation to be subâoptimal, regardless of the structural shocks. This suggests that the Malaysian economy might have hit its absorptive capacity constraint (i.e., a domestic economy saturated by GLCs)
Recommended from our members
Modeling the drugs and guns trade in a two-country model with endogenous growth
This paper develops a two-country, dynamic general equilibrium model of endogenous growth with illicit drugs and guns trade. With a trade framework that unifies both drug-control policies in consuming- and producing-country, as well as explicit modeling of firearm trade, the model is solved and parameterized to study the dynamic trade-off and growth effects of various drug-control policies. A production-consumption growth trade-off not previously documented in the literature is found. Further, under different conditions, and depending on the resulting gain in formal trade expansion, there are economic rationale to either a prohibitive or liberalization drug-control policy
The economics of the illicit drugs-for-guns trade and growth
Ever since US president Richard Nixon declared a war on drugs in 1971, different drug control policies have been implemented in both consumer and producer countries. These include policies ranging from crop eradication to an interdiction of drug shipments to outright legalization of drug possession. In this paper we develop a novel endogenous growth framework that unifies international trade, drugs control and accounts for consumersâ rational addiction and optimizing choice of drug consumption. Our results emphatically show that a one size-fits-all approach to drug control is ineffective. We show that there exists a production - consumption growth trade-off around the policy priority not previously documented in the literature. Moreover, we show that in the absence of a fundamental change to drug demand, drug control policies are unlikely to reduce illicit trades for drugs and guns in the long run
- âŚ