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An Endogenous Growth Model With Public Capital And Sustainable Government Debt

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  • ALFRED GREINER

Abstract

This paper presents and analyses an endogenous growth model with public capital and public debt. It is assumed that the ratio of the primary surplus to gross domestic income is a positive linear function of the debt income ratio which assures that public debt is sustainable. The paper then derives necessary conditions for the existence of a sustainable balanced growth path for the analytical model. Further, simulations are undertaken in order to gain insight into stability properties of the model and in order to analyse growth effects of deficit financed increases in public investment. The latter is done for the model on the sustainable balanced growth path as well as for the model along the transition path.

Suggested Citation

  • Alfred Greiner, 2007. "An Endogenous Growth Model With Public Capital And Sustainable Government Debt," The Japanese Economic Review, Japanese Economic Association, vol. 58(3), pages 345-361, September.
    • Handle: RePEc:bla:jecrev:v:58:y:2007:i:3:p:345-361
    DOI: 10.1111/j.1468-5876.2007.00394.x
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    References listed on IDEAS

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    1. Friedrich Heinemann, 2006. "Factor mobility, government debt and the decline in public investment," International Economics and Economic Policy, Springer, vol. 3(1), pages 11-26, April.
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