Journal of Economic Growth

, Volume 8, Issue 3, pp 325–347 | Cite as

Fiscal Policy and Long-run Growth in R&D-based Models with Endogenous Market Structure

  • Pietro F. Peretto
Article

Abstract

This paper shows that in a model of endogenous growth that does not exhibit the scale effect, taxes on consumption and labor income and the level and composition of public expenditure have no effect on steady-state growth. The only fiscal instruments that affect steady-state growth are taxes on asset and corporate income. In line with standard intuition, tax rates and public expenditure have level effects on income per capita. These results emphasize that although growth is endogenous, in the sense that it is determined by the model and it is subject to policy action, instruments that work by changing market size do not affect it. Effective growth-enhancing policies operate through the interest rate.

endogenous growth market structure fiscal policy taxation 

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Copyright information

© Kluwer Academic Publishers 2003

Authors and Affiliations

  • Pietro F. Peretto
    • 1
  1. 1.Department of EconomicsDuke UniversityUSA

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