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Fiscal Policy and Adjustment Costs of Private Investment in an Endogenous Growth Model with Public Capital

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  • Toshiki Tamai

Abstract

This paper develops an endogenous growth model with public capital and examines the growth and welfare effects of a fiscal policy that is financed by corporate taxation. In the model, we incorporate the investment decision-making of competitive firms by considering the adjustment costs of private investment. We show that there arises an indeterminacy of the balanced growth path. Furthermore, it is demonstrated that growth-maximizing policy is not equivalent to welfare-maximizing policy on the balanced growth path.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 62 (2006)
Issue (Month): 4 (December)
Pages: 455-470

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200612)62:4_455:fpaaco_2.0.tx_2-f

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Keywords: economic growth; public capital; welfare;

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