In this paper, we analyze government budget balance within a simple model of endogenous growth. For the AK model, simple analytical conditions for a tax cut to be self-financing can be derived. The critical variable is not the tax rate per se, but the transfer-adjusted tax rate. We discuss some...

In this paper, we analyze government budget balance with a simple model of endogenous growth. For the AK model, simple analyticalconditions for tax cut to be self-financing can be derived. The critical variable is not the tax rate per se, but the "transfer-adjusted" tax rate. We discuss some...