Public capital, public pension, and growth
AbstractThis paper constructs an endogenous growth model with overlapping generations, whose engine of economic growth is productive public capital. We investigate a public policy under which the government allocates tax revenue between investment in public capital accumulation and public pension provision. We show that increasing the share of spending on public pensions always reduces economic growth. However, we show numerically that public pension provision improves social welfare and there exists an optimal share of spending on public pension provision unless the value of the time discount factor of the government is sufficiently high. Moreover, we show that in an economy facing an aging population, an increase in social security provision for the old rather than an increase in public investment can be preferable from the viewpoint of social welfare. Copyright Springer Science+Business Media, LLC 2013
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Bibliographic InfoArticle provided by Springer in its journal International Tax and Public Finance.
Volume (Year): 20 (2013)
Issue (Month): 1 (February)
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Web page: http://www.springerlink.com/link.asp?id=102915
Public capital; Social security; Overlapping generations; E62; H54; H55;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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