Global Dynamics and Taxation in Models of Endogenous Economic Growthp, Li { White-Space : Pre-Wrap; }

This paper summarizes and extends in several dimensions previous results on the dynamics of two-sector endogenous growth models under the Lucas-Uzawa framework. The analysis provides a methodology to compute the global dynamics for a class of two-sector models with taxes on capital and labor income, subsidies to education, and leisure in the utility function. The results are used to provide general laws describing the effect of initial conditions, preference and production parameters, taxes and subsidies on the transitional dynamics, the global speed of convergence and on different measures of the welfare cost of taxation. Many of these results can be extended to other two-sector environments or even multisector economies.p, li { white-space: pre-wrap; }