Equilibrium dynamics in a two-sector model with taxes

Salvador Ortigueira; Manuel S. Santos

doi:10.1006/jeth.2001.2843

Equilibrium dynamics in a two-sector model with taxes

Salvador Ortigueira, Manuel S. Santos

Research output: Contribution to journal › Article › peer-review

18 Scopus citations

Abstract

In this paper we are concerned with the equilibrium dynamics of a two-sector model of endogenous growth with distortionary taxes. We show that for certain parameters values and tax schemes every equilibrium orbit-except the steady state solution-is non-interior; i.e., there are times in which one of the sectors is inactive. This analysis confirms that in multisector models the set of easily checkable, universal conditions that can guarantee the interiority of equilibrium solutions is rather limited. Journal of Economic Literature Classification Numbers: D90, E22.

Original language	English (US)
Pages (from-to)	99-119
Number of pages	21
Journal	Journal of Economic Theory
Volume	105
Issue number	1
DOIs	https://doi.org/10.1006/jeth.2001.2843
State	Published - Jan 1 2002
Externally published	Yes

Keywords

Competitive equilibrium
Distortionary taxes
Dynamic instability
Non-interior equilibrium orbit

ASJC Scopus subject areas

Economics and Econometrics

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Equilibrium dynamics in a two-sector model with taxes

Abstract

Keywords

ASJC Scopus subject areas

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