Income Taxation and Leisure Time’s Impact on China’s Economy Growth
GE Xiang-yu1,2, YE Ti-fang2, HU Chao-bin2
1.Centre for Studies of Intellectual Property Right, Zhongnan University of Economics and Law, Wuhan 430073, China; 2.School of Statistics and Mathematics, Zhongnan University of Economics and Law, Wuhan 430223,China
Abstract This paper first develops an endogenous economic growth model which involves three types of consumption utility function, such as individual consumption, public goods consumption, leisure time consumption. In such a framework, we discuss the effects of both taxation and leisure time on economic growth. Theoretical derivation indicates that there is a different optimal smooth tax rate from that in which leisure time is not considered in utility function. Economic growth can reach the maximum level when the optimal smooth tax rate is set this value. Then, it uses Chinese and Danish’s economics data of 1994 to 2011 to show the result as follows: there is a link between the impacts of taxation and leisure time on economic growth and economic development level. The taxation and leisure time plays a negative role in economic growth in China, while it plays a positive role in Danish. China is on the intermediate stage of industrialization while Danish is in a post industrial society.
2014, Vol. 31 
