Social Status, Progressive Taxation, Macroeconomic (In)Stability, and Growth with Productive Government Spending

• Main Authors: Liang-Chieh Chiu, 邱亮潔
• Other Authors: Hung-Ju Chen
• Format: Others
• Language: en_US
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/67266619334517488072

碩士 === 國立臺灣大學 === 經濟學研究所 === 102 === This paper has theoretically investigated the effects of households’ desires for social status and progressive income taxation on economic growth and stability properties in exogenous- and endogenous-growth models with productive government spending. Households accumulate capital not only for their implied consumption, but for the resulting social status; however, this motive for investment is also influenced by the degree of progressivity of the income tax. We found that in the exogenous-growth model, when households were relatively concerned about their social status, they accumulated more capital, thus promoting output; when the income tax became more progressive, it depressed the investment and output. In the endogenous-growth model, pursuing for social status drove economic growth, whereas a higher progressivity of the income tax harmed the rate of growth. On the other side, concerning the stability property, there was a saddle-path equilibrium which was proven unaffected by the spirit of capitalism and the progressive income tax in the exogenous-growth model. However, the stability of the endogenous-growth model was analytically determined by three factors below: (i) the level of the income tax schedule; (ii) the degree of productivity of government spending; and (iii) the extent of progressivity of the income tax.