TY  - JOUR
AU  - Roubini,Nouriel
AU  - Milesi-Ferrett,Gian Maria
TI  - Taxation and Endogenous Growth in Open Economies
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4881
PY  - 1994
Y2  - October 1994
UR  - http://www.nber.org/papers/w4881
L1  - http://www.nber.org/papers/w4881.pdf
N1  - Author contact info:
Nouriel Roubini
Department of Economics, KMC 7-83
Stern School of Business, New York University
44 West 4th Street
New York, NY  10012
Tel: 212/998-0886
Fax: 212/995-4218
E-Mail: nroubini@stern.nyu.edu

Gian Maria Milesi Ferretti
International Monetary Fund
Western Hemisphere Department, HQ1-10-120
700 19th Street, N.W.
Washington, DC 20431
Tel: 202 623-7441
Fax: 202 589-7441
E-Mail: gmilesiferretti@imf.org
AB  - This paper examines the effects of taxation of human capital, physical capital and foreign assets in a multi-sector model of endogenous growth.  It is shown that in general the growth rate is reduced by taxes on capital and labor (human capital) income.  When the government faces no borrowing constraints and is able to commit to a given set of present and future taxes, it is shown that the optimal tax plan involves high taxation of both capital and labor in the short run.  This allows the government to accumulate sufficient assets to finance spending without any recourse to distortionary taxation in the long run.  When restrictions to government borrowing and lending are imposed, the model implies that human and physical capital should be taxed similarly.
ER  -