An exploration of the desirability of tax cycles

Liew, Andre Y. (2011). An exploration of the desirability of tax cycles Honours Thesis, School of Economics, The University of Queensland.

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Author Liew, Andre Y.
Thesis Title An exploration of the desirability of tax cycles
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 2011
Thesis type Honours Thesis
Supervisor A/Prof Begona Dominguez
Total pages 75
Language eng
Subjects 340000 Economics
Formatted abstract

This thesis considers the optimal composition of taxation and borrowing to finance government expenditure. In particular, I consider under what conditions tax cycles represent optimal policy.

Hagedorn (2010) shows that tax cycles can represent the optimal policy in a model with no uncertainty. He also shows that if frictions are added to the economy that tax cycles are more likely to be optimal. I extend Hagedorn’s analysis in three ways. First, I relax Hagedorn’s budget constraint to analyse the impact of a windfall gain on optimal tax policy. Second, I consider the effect of making government expenditure productive. Third, I endogenise government expenditure, which is exogenous in Hagedorn’s analysis, and examine how this affects the results from his model.

Keyword Optimal taxation
Tax cycles
Productive government expenditure

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Created: Tue, 28 Feb 2012, 11:24:32 EST by Carmen Mcnaught on behalf of School of Economics