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Optimal Fiscal Policy In A Growing Economy With Public Capital

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  • G MEZ, MANUEL A.

Abstract

This paper devises a fiscal policy by means of which the first-best optimal equilibrium can be attained as a market equilibrium in an endogenous growth model with public capital. The optimal equilibrium requires that public (private) investment be zero along the transition to the balanced growth path if the initial ratio of public to private capital is higher (lower) than its long-term value. We also show that the transitional dynamics can be determined by noting that the continuity of the shadow prices involves the continuity of the consumption path.

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Bibliographic Info

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

Volume (Year): 8 (2004)
Issue (Month): 04 (September)
Pages: 419-435

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Handle: RePEc:cup:macdyn:v:8:y:2004:i:04:p:419-435_03

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Cited by:
  1. Pierre‐Richard Agénor, 2011. "Schooling and Public Capital in a Model of Endogenous Growth," Economica, London School of Economics and Political Science, vol. 78(309), pages 108-132, January.
  2. Andreas Irmen & Johanna Kühnel, 2008. "Productive Government Expenditure and Economic Growth," Working Papers 0464, University of Heidelberg, Department of Economics, revised May 2008.
  3. Noritaka Maebayashi & Takeo Hori & Koichi Futagami, 2012. "Dynamic analysis of reductions in public debt in an endogenous growth model with public capital," Discussion Papers in Economics and Business 12-08, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  4. T. Tamai, 2008. "Optimal fiscal policy in an endogenous growth model with public capital: a note," Journal of Economics, Springer, vol. 93(1), pages 81-93, February.
  5. Nigar Hashimzade & Gareth D. Myles, 2009. "Growth and Public Infrastructure," Economics & Management Discussion Papers em-dp2009-03, Henley Business School, Reading University.
  6. Seiya Fujisaki, 2012. "Optimal fiscal policy with social status and productive government expenditure," Economics Bulletin, AccessEcon, vol. 32(1), pages 960-968.

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