The Marginal Cost of Public Funds in Growing Economies

Hashimzade, N.; Myles, G.D.

Abstract

The marginal cost of public funds (MCF) measures the cost to the economy of raising government revenue. The MCF can be used to guide reform of the tax system and to determine an efficient level of government expenditure. It can also be used as an input into cost-benefit analysis. Previous applications of the concept have developed a methodology in a context of a static economy. We develop the methodology of the MCF to extend the concept to growing economies. The extended concept is then applied to variants of the Barro endogenous growth model with a productive public input. The MCF is used to address the choice between labour and capital taxes and to explore the implications of infrastructural spill-overs across regions.

Citation

Hashimzade, N., & Myles, G. (2014). The Marginal Cost of Public Funds in Growing Economies. Annales d'économie et de statistique, 113-114, https://doi.org/10.15609/annaeconstat2009.113-114.11

• Journal Article Type: Article
• Publication Date: Jun 1, 2014
• Deposit Date: Dec 8, 2014
• Publicly Available Date: Dec 10, 2014
• Journal: Annales d'Economie et de Statistique
• Print ISSN: 0769-489X
• Electronic ISSN: 2272-6497
• Publisher: Association pour le développement de la recherché en économie et en statistique
• Peer Reviewed: Peer Reviewed
• Volume: 113-114
• DOI: https://doi.org/10.15609/annaeconstat2009.113-114.11
• Public URL: https://durham-repository.worktribe.com/output/1440695
• Publisher URL: http://annales.ensae.fr/