On public investment, long-run growth, and the real exchange rate
AbstractThis paper extends the Barro (1990) endogenous growth model with productive government services to a two-country world with perfect capital mobility, populated by optimising agents with uncertain lifetimes. It shows that increases in government spending on infrastructure for the home country result in higher growth rates and a terms of trade improvement. Both these effects are reversed after a point, showing that a hump-shaped curve--similar to the Barro curve, but with different properties--can be obtained here even with lump-sum taxes. We also examine the welfare implications of public investment policies, and characterise the world economy's dynamics. Copyright 2002, Oxford University Press.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 54 (2002)
Issue (Month): 1 (January)
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- Florian Misch & Norman Gemmell & Richard Kneller, 2013.
"Growth and Welfare Maximization in Models of Public Finance and Endogenous Growth,"
Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 15(6), pages 939-967, December.
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- Florian Misch & Norman Gemmell & Richard Kneller, . "Growth and Welfare Maximization in Models of Public Finance and Endogenous Growth," Discussion Papers 08/09, University of Nottingham, CREDIT.
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- Schiffbauer, Marc, 2006. "Theoretical and methodological study on the role of public policies in fostering innovation and growth," Papers DYNREG04, Economic and Social Research Institute (ESRI).
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- Schiffbauer, Marc, 2007. "Calling for innovations - infrastructure and sources of growth," Papers DYNREG18, Economic and Social Research Institute (ESRI).
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