Massimiliano Marzo

This paper surveys recent research on the link between fiscal policy and growth, in both theoretical and empirical contexts, focusing on infinite-horizon representative agent models. The goal is to show the impact on the growth rate derived from the introduction of flat-rate taxes within a wide variety of models. The analysis discusses one-sector and two-sector models with physical and human capital involving taxes on income of various kind, with productive and unproductive public expenditure. Consumption and investment taxes are discussed. A brief review of empirical work is also presented, together with a discussion of the most recent results concerning optimal taxation. The paper also contains some remarks about the relationship between taxes and growth within alternative modelling frameworks, like OLG, which do not form an explicit subject of this survey.