We construct a model of endogenous investment specific techological change in which the stock of public capital influences the real price of capital goods. We show that the growth and welfare maximizing tax rates coincide in the planned economy. When factor income taxes finance public investment...

We construct a model of endogenous growth in which public capital financed by distortionary taxes influences investment specific technological change. Our main result is that there exist infinitely many capital and labor tax-subsidy combinations that decentralize the planner's growth rate. Hence...