This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Productive Government Expenditure In A Stochastically Growing Economy

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Turnovsky, Stephen J.

Additional information is available for the following registered author(s):

Abstract

This paper analyzes productive government expenditure in a stochasticAK growth model. First, a centrally planned economy is characterized,emphasizing the trade-off between the effects of both deterministicand stochastic government expenditures on the equilibrium growth rateand its variance. Both the growth-maximizing and thewelfare-maximizing shares of government expenditure are derived andshown to depend (differentially) upon the degree of risk in theeconomy. Whereas production risk reduces the welfare-maximizingshare of government expenditure, it may either increase or decreasethe growth-maximizing share, depending upon the degree of riskaversion. Next, the stochastic equilibrium in a decentralized economyis derived. The first-best optimal tax structure is characterized andits dependence on risk is determined. The formal analysis issupplemented by some numerical simulations to assess the quantitativesignificance of risk and the divergence that this generates between thewelfare-maximizing and growth-maximizing size of government.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://journals.cambridge.org/abstract_S136510059901305X
File Format: text/html
File Function: link to article abstract page
Download Restriction: no

Publisher Info
Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 3 (1999)
Issue (Month): 04 (December)
Pages: 544-570
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:cup:macdyn:v:3:y:1999:i:04:p:544-570_01

Contact details of provider:
Postal: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK
Fax: +44 (0)1223 325150
Email:
Web page: http://journals.cambridge.org/jid_MDY

For technical questions regarding this item, or to correct its listing, contact: (Mike Eden).

Related research
Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Obstfeld, Maurice, 1994. "Risk-Taking, Global Diversification, and Growth," American Economic Review, American Economic Association, vol. 84(5), pages 1310-29, December. [Downloadable!] (restricted)
    Other versions:
  2. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September. [Downloadable!] (restricted)
  3. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October. [Downloadable!] (restricted)
  4. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October. [Downloadable!] (restricted)
    Other versions:
  5. Greenwood, J. & Huffman, G., 1991. "Tax Analysis in A Real Business Cycle Model: On Measuring Harberger Triangles and Okun Gaps," UWO Department of Economics Working Papers 9103, University of Western Ontario, Department of Economics.
    Other versions:
  6. Cazzavillan, Guido, 1996. "Public Spending, Endogenous Growth, and Endogenous Fluctuations," Journal of Economic Theory, Elsevier, vol. 71(2), pages 394-415, November. [Downloadable!] (restricted)
  7. Benavie, Arthur & Grinols, Earl & Turnovsky, Stephen J., 1996. "Adjustment costs and investment in a stochastic endogenous growth model," Journal of Monetary Economics, Elsevier, vol. 38(1), pages 77-100, August. [Downloadable!] (restricted)
  8. Steve Ambler & Alain Paquet, 1994. "Fiscal spending shocks, endogenous government spending, and real business cycles," Discussion Paper / Institute for Empirical Macroeconomics 94, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  9. Baxter, Marianne & King, Robert G, 1993. "Fiscal Policy in General Equilibrium," American Economic Review, American Economic Association, vol. 83(3), pages 315-34, June. [Downloadable!] (restricted)
    Other versions:
  10. repec:cup:macdyn:v:1:y:1997:i:3:p:615-39 is not listed on IDEAS
  11. Robert J. Barro & Paul Romer, 1993. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr93-1.
    Other versions:
    • Robert J. Barro & Paul M. Romer, 1991. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr91-1.
  12. 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. [Downloadable!] (restricted)
  13. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  14. Grier, Kevin B. & Tullock, Gordon, 1989. "An empirical analysis of cross-national economic growth, 1951-1980," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 259-276, September. [Downloadable!] (restricted)
  15. Gali, Jordi, 1994. "Government size and macroeconomic stability," European Economic Review, Elsevier, vol. 38(1), pages 117-132, January. [Downloadable!] (restricted)
  16. Barro, Robert J. & Sala-i-Martin, Xavier, 1992. "Public Finance in Models of Economic Growth," CEPR Discussion Papers 630, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  17. Ambler, Steve & Paquet, Alain, 1996. "Fiscal spending shocks, endogenous government spending, and real business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 20(1-3), pages 237-256. [Downloadable!] (restricted)
  18. Grinols, Earl L. & Turnovsky, Stephen J., 1993. "Risk, the financial market, and macroeconomic equilibrium," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 1-36. [Downloadable!] (restricted)
    Other versions:
  19. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January. [Downloadable!] (restricted)
  20. Turnovsky, Stephen J., 1997. "Fiscal Policy In A Growing Economy With Public Capital," Macroeconomic Dynamics, Cambridge University Press, vol. 1(03), pages 615-639, September. [Downloadable!]
  21. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August. [Downloadable!] (restricted)
  22. Sandmo, Agnar, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Blackwell Publishing, vol. 37(3), pages 353-60, July. [Downloadable!] (restricted)
  23. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June. [Downloadable!] (restricted)
    Other versions:
  24. Edwards, John H. Y., 1990. "Congestion function specification and the "publicness" of local public goods," Journal of Urban Economics, Elsevier, vol. 27(1), pages 80-96, January. [Downloadable!] (restricted)
  25. Aizenman, Joshua & Marion, Nancy P, 1993. "Policy Uncertainty, Persistence and Growth," Review of International Economics, Blackwell Publishing, vol. 1(2), pages 145-63, June.
    Other versions:
  26. Futagami, Koichi & Morita, Yuichi & Shibata, Akihisa, 1993. " Dynamic Analysis of an Endogenous Growth Model with Public Capital," Scandinavian Journal of Economics, Blackwell Publishing, vol. 95(4), pages 607-25, December.
  27. Devereux, Michael B & Smith, Gregor W, 1994. "International Risk Sharing and Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 535-50, August. [Downloadable!] (restricted)
    Other versions:
  28. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-51, December. [Downloadable!] (restricted)
    Other versions:
  29. Corsetti, Giancarlo, 1997. "A portfolio approach to endogenous growth: equilibrium and optimal policy," Journal of Economic Dynamics and Control, Elsevier, vol. 21(10), pages 1627-1644, August. [Downloadable!] (restricted)
  30. Campbell, John Y, 1996. "Understanding Risk and Return," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 298-345, April. [Downloadable!] (restricted)
    Other versions:
  31. Turnovsky, Stephen J., 1996. "Optimal tax, debt, and expenditure policies in a growing economy," Journal of Public Economics, Elsevier, vol. 60(1), pages 21-44, April. [Downloadable!] (restricted)
  32. Eaton, Jonathan, 1981. "Fiscal Policy, Inflation and the Accumulation of Risky Capital," Review of Economic Studies, Blackwell Publishing, vol. 48(3), pages 435-45, July. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Andreas Irmen & Johanna Kühnel, 2008. "Productive Government Expenditure and Economic Growth," Working Papers 0464, University of Heidelberg, Department of Economics, revised May 2008. [Downloadable!]
    Other versions:
  2. Ingrid Ott & Susanne Soretz, 2004. "Growth and Welfare Effects of Tax Cuts: The Case of a Productive Public Input with Technological Risk," Empirica, Springer, vol. 31(2), pages 117-135, June. [Downloadable!] (restricted)
    Other versions:
  3. Schiffbauer, Marc, 2007. "Calling for innovations - infrastructure and sources of growth," Papers DYNREG18, Economic and Social Research Institute (ESRI). [Downloadable!]
  4. Clemens, Christiane & Soretz, Susanne, 1999. "Konsequenzen des Zins- und Einkommensrisikos auf das wirtschaftliche Wachstum," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-221, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
  5. Marina Azzimonti-Renzo & Pierre-Daniel G. Sarte & Jorge Soares, 2003. "Optimal public investment with and without government commitment," Working Paper 03-10, Federal Reserve Bank of Richmond. [Downloadable!]
  6. Dimitrios Varvarigos, 2005. "Policy Variability in Models of Endogenous Growth with Productive Spending," The School of Economics Discussion Paper Series 0526, Economics, The University of Manchester. [Downloadable!]
  7. Clemens, Christiane, 1999. "Income Taxation, Government Expenditure, and Long-Run Stochastic Growth," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-220, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
  8. Ott, Ingrid & Soretz, Susanne, 2006. "Infrastruktur als Investitionsdeterminante von KMU," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-329, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
  9. Susanne Soretz, 2007. "Efficient Dynamic Pollution Taxation in an Uncertain Environment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 36(1), pages 57-84, January. [Downloadable!] (restricted)
  10. Ingrid Ott & Susanne Soretz, 2006. "Governmental activity and private capital adjustment," Working Paper Series in Economics 26, University of Lüneburg, Institute of Economics. [Downloadable!]
Statistics
Access and download statistics

Did you know? Authors registered on the RePEc Author Service receive monthly emails with details about downloads and abstract views of their works.

This page was last updated on 2009-11-28.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.