Competition,taxation and economic growth |
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| Institution: | 1. Division of Business and Management, United International College- Beijing Normal University. Hong Kong Baptist University, B414, 28, Jinfeng Road, Tangjiawan, Zhuhai, Guangdong Prov. China 519085;2. Newcastle Business School, Northumbria University, Newcastle upon Tyne, UK;1. Department of Economics, Management and Quantitative Methods, University of Milan, via Conservatorio 7, 20122 Milan, Italy;2. Department of Applied Mathematics and Sciences, Khalifa University, PO Box 127788, Abu Dhabi, UAE;3. School of Accounting, Economics and Finance, University of Wollongong, Northfields Avenue, Wollongong 2522 NSW, Australia;4. Department of Mathematics and Statistics, Acadia University, 2011 Acadia University, Wolfville, Nova Scotia, Canada;5. Department of Economics and Statistics “Cognetti de Martiis”, University of Turin, Lungo Dora Siena 100A, 10153, Turin, Italy;1. School of Public Economics & Administration, Shanghai University of Finance & Economics, China;2. School of Finance, China Financial Policy Research Center, Renmin University of China, Beijing, China |
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| Abstract: | The paper mainly examines the relationship between economic growth, tax policy and sectoral labor distribution in an endogenous growth model with expanding varieties. For analyzing these relationships, we consider an economy where three sectors of production are vertically integrated: final goods sector, intermediate goods sector and research sector. We show that the extent of imperfect competition in the intermediate products market affects both economic growth and the allocation of the available labor to all the sectors employing this input. The resources from capital taxation, which are used for financing research sector, have a U-shaped effect on growth and lead to a movement of the labor from research sector to final goods sector. Additionally, we show that if there exists a higher competitive structure in an economy, the probability of the positive effect of an increase in tax on growth gets higher. |
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