Economics

It is common to study the impact of a permute in capital or labor taxes by employing a meter reading of the integrity-sector classic growth toughie, with neutral technological change. In this a paper an alternative approach is adopted: technological change is enthronement-specific, and is determined endogenously. Within this model it is shown that the effects of various distortional taxes and subsidies git be quite different than the effects that are ordinarily observed in other more conventional models. The model here is a simple version of a neoclassical growth model. However, it also borrows from a related literature. Greenwood et al. (1997) build on the measurement work of Gordon, 1990 R. Gordon, The Measurement of Durable Goods Prices, University of wampum Press, Chicago (1990).Gordon (1990), and show that investment-specific technological change is an important ingredient in understanding the source of growth in the US economy. They baffle the compelling argument that it is falling real termss for new investment goods that accounts for most of the observed growth, with relatively little being left field over to be explained by other factors, much(prenominal) as total factor productivity. Greenwood et al. (2000) then utilize this reasoning to verbalism at certain related business cycle issues.

However, in neither of these papers do they explicitly model the instrument by which the real hurt of capital falls. Instead, they assume that this is ripe an exogenous process. In this paper the changing relative price of capital is driven by research activity, which is undertaken by substance of labor effort. Increased research spending in one period lowers the cost of producing capital in a posterior period. The fact that there are changes in the real price of various capital goods is not news. This has been extensively documented by, among others, Gordon (1990) and Jorgenson (2001). The implications that this has for issues such as capital taxation seem unexplored. However, it seems unsatisfactory to... If you deprivation to get a full essay, order it on our website: Orderessay

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