The Generational Effects of Fiscal Policy in a Small Open Economy
AbstractThe reform of the fiscal system has for many years occupied center stage in policy discussions in developing countries. The authors employ a simple overlapping generations (OLG) model in a small open economy setting to study the impact of fiscal policy reform on the welfare of various generations and on the country’s growth rate. The authors find that while reallocating public expenditures from transfers to productive expenditures has sizable positive growth effects, individuals who are retired at the time of the policy change experience a welfare loss. However, younger generations experience larger welfare gains. The authors also find that running a public debt to finance transfer payments can decrease growth substantially and only slightly increase welfare of retirees. However, if debt is used to finance education expenditures or infrastructure investment, growth and welfare increase but only in the short run.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoArticle provided by in its journal Public Finance Review.
Volume (Year): 40 (2012)
Issue (Month): 2 (March)
Contact details of provider:
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications).
If references are entirely missing, you can add them using this form.