Flat tax reform: a quantitative exploration

Article Abstract:

A scenario wherein the existing income and capital tax structure is replaced by a flat tax is explored. This tax reform scenario, which is based on a 1995 proposal by Hall and Rabushka, has implications for capital accumulation and labor supply, as well as distributional consequences. Using a dynamic general equilibrium model, it is proven that the removal of actual taxation on capital income has a positive effect on capital accumulation. It is also shown that tax reform will lead to an increase in aggregate labor and a higher concentration of distributions on earnings, income and wealth.

Tax reform, Distribution (Economics), Equilibrium (Economics), Flat tax

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On the role of government in a stochastically growing open economy

Article Abstract:

The role of government expenditure on stability and growth in a stochastically growing small open economy and the implications of these relationships for the optimal size of government in such an economy are analyzed. The analysis, which uses a basic stochastic growth model of a small open economy, focuses on three issues, namely, the stochastic equilibrium for a centrally planned economy, the stochastic equilibrium in a decentralized economy and the role of government production expenditure.

Public Finance Activities, National Government Expenditures, Economic development, Expenditures, Public, Public expenditures, Economic stabilization

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