Growth, Congestion of Public Goods, and Second-Best Optimal Policy
AbstractThis paper presents a general equilibrium endogenous growth model in which public spending is divided between public productive services and public consumption. A distinguishing feature of the model is the assumption that both components of public spending can be over used and, thus, congested by the private agents. We study the second-best dynamics of the model and prove that it is determinate. Moreover, we show that the optimal second-best policy could be not unique. Finally, the relationship between congestion and the optimal second-best policy, on the one hand, and congestion and the long run growth rate, on the other, is established.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.5.
Date of creation: Jan 2004
Date of revision:
Endogenous growth; Congestion; Public spending; Second-Best;
Find related papers by JEL classification:
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
- H5 - Public Economics - - National Government Expenditures and Related Policies
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
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