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In this project we explore the implications of an incomplete tax system for our Neo Classical Growth model. We study the steady state equilibrium when
In this project we explore the implications of an incomplete tax system for our Neo Classical Growth model. We study the steady state equilibrium when three inputs (capital, labor and land) are used in production but the government can only tax capital and labor and it is constrained not to tax land. The government inability to tax one input can be viewed as a broader interpretation of "land" as natural resources or to include nature's ability to absorb waste, etc. We will solve the steady state of the model and calibrate it to the Canadian economy. We will then quantitatively analyze optimal tax policy for the steady state (in the long run) and compare our findings to those discussed in class during the lecture on the "standard" Neo Classical Growth model
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