Jesús Ruiz

Dynamic Laffer curves

In an endogenous growth model with human capital accumulation, we discuss the possibility of welfare improving changes on the 1scal policy stance in some actual economies. First, we characterize the extent to which the initial fall in revenues produced by a permanent tax cut can be compensated by an increase in the tax base, due to a dynamic La#er curve efect, showing that there is, in fact, a non-trivial margin for substituting debt for taxes on labor and capital income. Second, we show that the largest feasible reduction in labor income tax rates may easily produce a higher welfare gain than the largest feasible reduction in capital income tax rates. Two qualifications: (a) feasible tax cuts exist only for a relatively high elasticity of intertemporal substitution of consumption, and (b) the preference for the largest feasible tax cut on labor income rather than that on capital income reverses for a low appreciation for leisure, relative to consumption, in the preferences of the representative agent.

Indeterminacy under non-separability of public consumption and leisure in the utility function

Abstract In a one sector growth model with public consumption in the utility function, the competitive equilibrium can be indeterminate for plausible values of the elasticity of intertemporal substitution of consumption, under constant returns to scale and endogenous government expenditures. Non-separability between public consumption and leisure in the utility function is crucial for this result.

Endogenous Growth Models

The AK model, introduced by Rebelo [6], is characterized by a constant returns to scale technology, linear in physical capital

Numerical Solution Methods

\displaystyle{ Y _{t} = AK_{t}, }

Economic Growth: Theory and Numerical Solution Methods

with A representing the constant average and marginal productivity of capital, and K t the aggregate stock of capital. As we saw in Chap. 2, aggregate constant returns to scale in the cumulative inputs is a necessary condition for endogenous growth. This assumption is a violation of the Inada condition \(\lim _{K_{t}\rightarrow \infty }F^{{\prime}}\left (K_{t}\right ) = 0,\) which is assumed to hold in neoclassical growth models under decreasing returns to scale.

Tax Reforms in an Endogenous Growth Model with Pollution

In this article we examine the consequences of introducing tradable, nontradable and investment goods in a small open economy business cycle model in the case of Spain. The stochastic simulation of the model and its comparison to the Spanish economic data show that the model is able to mimic two prominent features of the Spanish cycle: (1) the dual inflation phenomenon, that is, the cyclical properties of the divergent behaviour between nontradable and tradable prices; and (2) the high volatility of private consumption relative to the volatility of output, a feature known as the Dolado et al. puzzle.

The environmental Kuznets curve and equilibrium indeterminacy

To learn about the causes of aggregate fluctuations is one of the basic goals of Macroeconomics. One of the main characteristics of aggregate fluctuations is that business cycles are neither regular nor predictable. Because of that, most economists consider that there are different shocks impinging on the economy, which are different in nature and intensity. These shocks do not follow a known pattern. Observed fluctuations in actual economies are the result of such shocks and the propagation mechanisms associated to them. There are different schools of thought in Macroeconomics whose main difference relates to the type of specific shocks which are accountable for economic fluctuations as well as in the description of their propagation mechanisms.