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 | |
| State | Published - 2002 |
| Externally published | Yes |
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Keywords
- Competitive equilibrium
- Distortionary taxes
- Dynamic instability
- Non-interior equilibrium orbit
ASJC Scopus subject areas
- Economics and Econometrics
Cite this
Equilibrium dynamics in a two-sector model with taxes. / Ortigueira, Salvador; Santos, Manuel.
In: Journal of Economic Theory, Vol. 105, No. 1, 2002, p. 99-119.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Equilibrium dynamics in a two-sector model with taxes
AU - Ortigueira, Salvador
AU - Santos, Manuel
PY - 2002
Y1 - 2002
N2 - 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.
AB - 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.
KW - Competitive equilibrium
KW - Distortionary taxes
KW - Dynamic instability
KW - Non-interior equilibrium orbit
UR - http://www.scopus.com/inward/record.url?scp=0036071525&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=0036071525&partnerID=8YFLogxK
U2 - 10.1006/jeth.2001.2843
DO - 10.1006/jeth.2001.2843
M3 - Article
AN - SCOPUS:0036071525
VL - 105
SP - 99
EP - 119
JO - Journal of Economic Theory
JF - Journal of Economic Theory
SN - 0022-0531
IS - 1
ER -