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Characterizing the Optimal Composition of Government Expenditures

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Abstract

This paper extends the neoclassical growth model with productive public capital by including an infrastructure efficiency index, which is assumed to depend on a public choice variable, in particular, the share of public spending allocated to productive public consumption. A golden rule for the allocation of public expenditure between productive consumption and investment is specified. Under this framework, the observed path for the stock of infrastructures and the proposed efficiency index in the US economy during the last fifty years have been close to optimal: a lower stock of infrastructures has been accumulated, but it has been used more efficiently.

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Bibliographic Info

Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2004/81.

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Length: 30 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:cea:doctra:e2004_81

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Keywords: Public Expenditure Composition; Public Investment; Public Consumption; Nominal and Effective Infrastructures; Infrastructures Efficiency Index;

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References

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  1. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
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  27. repec:fth:coluec:394 is not listed on IDEAS
  28. Ambler, Steve & Paquet, Alain, 1996. "Fiscal spending shocks, endogenous government spending, and real business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 20(1-3), pages 237-256.
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Cited by:
  1. Jordi Caballé & Jana Hromcová, 2011. "The Role of Central Bank Operating Procedures in an Economy with Productive Government Spending," Computational Economics, Society for Computational Economics, vol. 37(1), pages 39-65, January.

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