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| McMillan, Margaret S.; Masters, William A.. |
| Why do so many African governments consistently impose high tax rates and make little investment in productive public goods, when alternative policies could yield greater tax revenues and higher national income? We posit and test an intertemporal political economy model in which the government sets tax and R&D levels while investors respond with production. Equilibrium policy and growth rates depend on initial cost structure. We find that in many (but not all) African countries, low tax/high investment regimes would be time-inconsistent, primarily because production technology requires relatively large sunk costs. For pro-growth policies to become sustainable, commitment mechanisms or new production techniques would be needed. |
| Tipo: Working or Discussion Paper |
Palavras-chave: International Development; Research and Development/Tech Change/Emerging Technologies. |
| Ano: 2000 |
URL: http://purl.umn.edu/11839 |
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| Masters, William A.; McMillan, Margaret S.. |
| This paper introduces new data on climatic conditions to empirical tests of growth theories. We find that, since 1960, temperate countries have converged towards high levels of income while tropical nations have converged towards various income levels associated with economic scale and the extent of the market. These results hold for a wide range of tests. A plausible explanation is that temperate regions' growth was assisted by their climate, perhaps historically for their transition out of agriculture into sectors whose productivity converges across countries, while tropical countries' growth is relatively more dependent on gains from specialization and trade. |
| Tipo: Working or Discussion Paper |
Palavras-chave: International Development. |
| Ano: 2001 |
URL: http://purl.umn.edu/11845 |
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