Taxation, growth and fiscal institutions : a political and economic analysis

"The causal relationship between growth and inequality is complex ... Few recent studies in this field have shown that the nature of relationship is multifaceted and non-linear. In addition to the intrinsic nonlinear nature of the relationship, government and institutions play a pivotal role in distributing the benefits of growth to reduce inequality. The responsiveness greatly depends upon a country's initial conditions in terms of inequality and the nature of democracy prevailing in that country. This book highlights the role of institutions in explaining the gulf between inequality and growth. Our method for exploring the role of institutions uses a dynamic general equilibrium framework and econometric techniques. Econometrically, two important hypotheses are tested. First, holding fixed institutions, the growth rate increases as inequality decreases. Second, holding fixed inequality, improvement in the integrity of fiscal institutions results in higher economic growth. This book examines the connections among taxation, growth, and fiscal institutions in an overlapping generations production economy. "--Preface