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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. William Easterly & Sergio Rebelo, 1994. "Fiscal Policy and Economic Growth: An Empirical Investigation," NBER Working Papers 4499, National Bureau of Economic Research, Inc.
  2. Shantayanan Devarajan & Danyang Xie & Heng-Fu Zou, 2002. "Should Public Capital Be Subsidized or Provided?," Macroeconomics 0212005, EconWPA.
  3. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June Cita.
  4. King, Robert G & Rebelo, Sergio, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S126-50, October.
  5. Sergio T. Rebelo, 1992. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  6. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  7. Zhang, Tao & Zou, Heng-fu, 1998. "Fiscal decentralization, public spending, and economic growth in China," Journal of Public Economics, Elsevier, vol. 67(2), pages 221-240, February.
  8. Zou Heng-fu, 1994. "Dynamic Effects of Federal Grants on Local Spending," Journal of Urban Economics, Elsevier, vol. 36(1), pages 98-115, July.
  9. Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association, vol. 46(2), pages 207-27, June Cita.
  10. Liutang Gong & Heng-fu Zou, 2001. "Optimal taxation and intergovernmental transfer in a dynamic model with multiple levels of government," CEMA Working Papers 54, China Economics and Management Academy, Central University of Finance and Economics.
  11. Glomm, Gerhard & Ravikumar, B., 1994. "Public investment in infrastructure in a simple growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1173-1187, November.
  12. Heng-fu Zou, 1994. "Taxes, Federal Grants, Local Public Spending, and Growth," CEMA Working Papers 78, China Economics and Management Academy, Central University of Finance and Economics.
  13. Liutang Gong & Heng‐Fu Zou, 2011. "Public Expenditures, Taxes, Federal Transfers, and Endogenous Growth," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(6), pages 973-991, December.
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Citations

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Cited by:
  1. Fedderke, J.W. & Bogetic, Z., 2009. "Infrastructure and Growth in South Africa: Direct and Indirect Productivity Impacts of 19 Infrastructure Measures," World Development, Elsevier, vol. 37(9), pages 1522-1539, September.
  2. Ramiro Gil-Serrate & Julio López-Laborda, . "Modelling Tax Decentralisation And Regional Growth," Working Papers 14-05 Classification-JEL , Instituto de Estudios Fiscales.
  3. Wang, Chan, 2012. "A very preliminary survey on growth and development," MPRA Paper 39037, University Library of Munich, Germany.
  4. Darong Dai, 2012. "Stochastic Versions of Turnpike Theorems in the Sense of Uniform Topology," Annals of Economics and Finance, Society for AEF, vol. 13(2), pages 381-423, November.
  5. Dai, Darong, 2011. "Wealth Martingale and Neighborhood Turnpike Property in Dynamically Complete Market with Heterogeneous Investors," MPRA Paper 46416, University Library of Munich, Germany.
  6. Wang, Zhiguo & Ma, Liang, 2012. "New Development of Fiscal Decentralization in China," MPRA Paper 36918, University Library of Munich, Germany.
  7. 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, vol. 13(1), pages 91-112, May.
  8. Zou, Heng-fu, 2012. "Optimal design of intergovernmental grants in a dynamic model," MPRA Paper 37427, University Library of Munich, Germany.
  9. Zhiguo Wang & Liang Ma, 2014. "Fiscal Decentralization in China: A Literature Review," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 51-65, May.

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