The paper by Sergio Rebelo explores the heterogeneity in economic growth rates across countries, attributing this disparity to differences in government policies. The author models growth as endogenous, meaning that growth occurs even without exogenous increases in productivity, such as technical progress. The models assume constant returns to scale and steady-state growth paths, which align with observed economic growth patterns. Key findings include: 1. **Long-Run Effects of Taxation**: Higher income tax rates decrease the rate of return to investment, leading to a permanent decline in capital accumulation and growth. Consumption taxes have similar effects but do not affect the growth rate. 2. **Growth and the Savings Rate**: Higher savings rates lead to higher growth rates, consistent with empirical observations. 3. **Disaggregation of Capital**: The economy can be divided into physical and human capital, with the growth rate determined by the net marginal product of capital and the elasticity of intertemporal substitution. 4. **Endogenous Leisure Choice**: Preferences that are time-separable can lead to endogenous leisure choices, consistent with steady-state growth. 5. **Capital Goods Produced with Nonreproducible Factors**: The presence of nonreproducible factors in capital goods production does not affect the growth rate as long as there is a "core" of capital goods produced without these factors. 6. **Multiple Consumption Goods**: The introduction of multiple consumption goods does not significantly alter the policy implications but requires certain parameter restrictions for steady-state growth to be optimal. 7. **Perpetual Growth and Nonreproducible Factors**: In the neoclassical model, perpetual growth is unfeasible if nonreproducible factors are required for production. Endogenous growth models, however, can achieve perpetual growth with constant returns to scale. The paper provides a theoretical framework to understand how economic policies can influence growth rates and highlights the importance of nonreproducible factors in the production of capital goods.The paper by Sergio Rebelo explores the heterogeneity in economic growth rates across countries, attributing this disparity to differences in government policies. The author models growth as endogenous, meaning that growth occurs even without exogenous increases in productivity, such as technical progress. The models assume constant returns to scale and steady-state growth paths, which align with observed economic growth patterns. Key findings include: 1. **Long-Run Effects of Taxation**: Higher income tax rates decrease the rate of return to investment, leading to a permanent decline in capital accumulation and growth. Consumption taxes have similar effects but do not affect the growth rate. 2. **Growth and the Savings Rate**: Higher savings rates lead to higher growth rates, consistent with empirical observations. 3. **Disaggregation of Capital**: The economy can be divided into physical and human capital, with the growth rate determined by the net marginal product of capital and the elasticity of intertemporal substitution. 4. **Endogenous Leisure Choice**: Preferences that are time-separable can lead to endogenous leisure choices, consistent with steady-state growth. 5. **Capital Goods Produced with Nonreproducible Factors**: The presence of nonreproducible factors in capital goods production does not affect the growth rate as long as there is a "core" of capital goods produced without these factors. 6. **Multiple Consumption Goods**: The introduction of multiple consumption goods does not significantly alter the policy implications but requires certain parameter restrictions for steady-state growth to be optimal. 7. **Perpetual Growth and Nonreproducible Factors**: In the neoclassical model, perpetual growth is unfeasible if nonreproducible factors are required for production. Endogenous growth models, however, can achieve perpetual growth with constant returns to scale. The paper provides a theoretical framework to understand how economic policies can influence growth rates and highlights the importance of nonreproducible factors in the production of capital goods.