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Fiscal Federalism, Public Capital Formation, and Endogenous Growth

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Author Info

  • Liutang Gong

    ()
    (Guanghua School of Management, Peking University
    Institute for Advanced Study, Wuhan University)

  • Heng-fu Zou

    ()
    (Guanghua School of Management, Peking University
    Institute for Advanced Study, Wuhan University
    Development Research Group, The World Bank)

Abstract

This paper extends the Barro (1990) growth model with one aggregate government spending and one flat income tax to include federal and local public consumption, federal and local public capital formation, federal and local taxes, and federal transfers to locality. It derives the rate of endogenous growth and examines how the growth rate and welfare respond to changes in federal taxes, local taxes, and federal transfers.

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Bibliographic Info

Article provided by Society for AEF in its journal Annals of Economics and Finance.

Volume (Year): 4 (2003)
Issue (Month): 2 (November)
Pages: 471-490

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Handle: RePEc:cuf:journl:y:2003:v:4:i:2:p:471-490

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Related research

Keywords: Fiscal federalism; Public expenditures; Public capital; Taxes; Federal transfers; Endogenous growth;

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References

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  1. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  2. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, Elsevier, vol. 32(3), pages 417-458, December.
  3. Zou, Heng-fu, 1996. "Taxes, Federal Grants, Local Public Spending, and Growth," Journal of Urban Economics, Elsevier, vol. 39(3), pages 303-317, May.
  4. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  5. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, National Tax Association, vol. 46(2), pages 237-43, June.
  6. King, R.G. & Rebelo, S., 1988. "Public Policy And Economic Growth: Developing Neoclassical Implications," RCER Working Papers, University of Rochester - Center for Economic Research (RCER) 225, University of Rochester - Center for Economic Research (RCER).
  7. Shantayanan Devarajan & Danyang Xie & Heng-fu Zou, 1999. "Should Public Capital Be Subsidized or Provided?," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 75, China Economics and Management Academy, Central University of Finance and Economics.
  8. Heng-fu Zou, 1995. "Dynamic Effects of Federal Grants on Local Spending," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 93, China Economics and Management Academy, Central University of Finance and Economics.
  9. Tao Zhang & Heng-fu Zou, 1996. "Fiscal decentralization, public spending, and economic growth in China," Policy Research Working Paper Series, The World Bank 1608, The World Bank.
  10. Glomm, Gerhard & Ravikumar, B., 1994. "Public investment in infrastructure in a simple growth model," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 18(6), pages 1173-1187, November.
  11. Liutang Gong & Heng‐Fu Zou, 2011. "Public Expenditures, Taxes, Federal Transfers, and Endogenous Growth," Journal of Public Economic Theory, Association for Public Economic Theory, Association for Public Economic Theory, vol. 13(6), pages 973-991, December.
  12. Liutang Gong & Heng-fu Zou, 2001. "Optimal taxation and intergovernmental transfer in a dynamic model with multiple levels of government," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 54, China Economics and Management Academy, Central University of Finance and Economics.
  13. Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association, National Tax Association, vol. 46(2), pages 207-27, June.
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Citations

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Cited by:
  1. Wang, Chan, 2012. "A very preliminary survey on growth and development," MPRA Paper 39037, University Library of Munich, Germany.
  2. Zou, Heng-fu, 2012. "Optimal design of intergovernmental grants in a dynamic model," MPRA Paper 37427, University Library of Munich, Germany.
  3. Dai, Darong, 2011. "Wealth Martingale and Neighborhood Turnpike Property in Dynamically Complete Market with Heterogeneous Investors," MPRA Paper 46416, University Library of Munich, Germany.
  4. Fedderke, Johannes W. & Bogetic & Zeljko, 2006. "Infrastructure and growth in South Africa : direct and indirect productivity impacts of 19 infrastructure measures," Policy Research Working Paper Series, The World Bank 3989, The World Bank.
  5. Juncheng Feng & Rui Hao & Yang Li & Kezhong Zhang, 2012. "The Effect of Leadership Transition on Government Expenditure: Evidence from China," Annals of Economics and Finance, Society for AEF, Society for AEF, vol. 13(1), pages 91-112, May.
  6. Ramiro Gil-Serrate & Julio López-Laborda, 2004. "Modelling tax decentralisation and regional growth," ERSA conference papers ersa04p194, European Regional Science Association.
  7. Wang, Zhiguo & Ma, Liang, 2012. "New Development of Fiscal Decentralization in China," MPRA Paper 36918, University Library of Munich, Germany.
  8. Zhiguo Wang & Liang Ma, 2014. "Fiscal Decentralization in China: A Literature Review," Annals of Economics and Finance, Society for AEF, Society for AEF, vol. 15(1), pages 51-65, May.
  9. Darong Dai, 2012. "Stochastic Versions of Turnpike Theorems in the Sense of Uniform Topology," Annals of Economics and Finance, Society for AEF, Society for AEF, vol. 13(2), pages 381-423, November.

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