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  • September 2006
  • Article
  • Journal of Public Economics

Dynamic Scoring: A Back-of-the-Envelope Guide

By: Matthew C. Weinzierl and N. Gregory Mankiw
  • Format:Print
  • | Pages:19
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Abstract

This paper uses the neoclassical growth model to examine the extent to which a tax cut pays for itself through higher economic growth. The model yields simple expressions for the steady-state feedback effect of a tax cut. The feedback is surprisingly large: for standard parameter values, half of a capital tax cut is self-financing. The paper considers various generalizations of the basic model, including elastic labor supply, general production technologies, departures from infinite horizons, and non-neoclassical production settings. It also examines how the steady-state results are modified when one considers the transition path to the steady state.

Keywords

Revenue Estimation; Taxation; Economic Growth

Citation

Weinzierl, Matthew C., and N. Gregory Mankiw. "Dynamic Scoring: A Back-of-the-Envelope Guide." Journal of Public Economics 90, no. 8 (September 2006): 1415–1433.
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About The Author

Matthew C. Weinzierl

Business, Government and the International Economy
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