Taxation, growth, and the spirit of capitalism |
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| Authors: | Wen-ya Chang Hsueh-fang Tsai Ching-chong Lai |
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| Affiliation: | a Department and Graduate Institute of Economics, Fu-Jen Catholic University, Hsinchuang, Taipei 24205, Taiwan;b Institute of Economics, National Sun Yat-Sen University, Kaohsiung 804, Taiwan;c Sun Yat-Sen Institute for Social Sciences and Philosophy, Academia Sinica, Taipei 115, Taiwan;d Institute of Economics, Academia Sinica, Taipei 115, Taiwan;e Department of Economics, National Taiwan University, Taipei 100, Taiwan |
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| Abstract: | This paper uses a general two-sector model of endogenous growth to examine how the spirit of capitalism affects the relation between public finance and growth. The spirit of capitalism is defined as acquisitive personal objectives. We find that if the spirit of capitalism is present, an increase in the share of government spending in output reduces the long-run growth rate. The negative relationship between fiscal spending and growth is consistent with empirical evidence. |
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| Keywords: | The spirit of capitalism Fiscal spending Lump-sum taxes Endogenous growth |
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