Budget Deficits and Economic Growth
AbstractThis paper investigates the sustainability and welfare effects of government budget deficits by using a simple endogenous growth model with overlapping generations. It is shown that, if the initial volume of government debt and the ratio of primary budget deficits to GDP are not large, then there can exist two steady-growth equilibria, one of which is associated with a higher growth rate and the other of which is associated with a lower growth rate. It is also shown that changes in government spending cannot be Pareto improving although they affect the long-run growth rate and each generation's utility.
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Bibliographic InfoPaper provided by Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University in its series Discussion Paper with number 133.
Length: 26,  p.
Date of creation: Jan 2003
Date of revision:
Note: January 8, 2003
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More information through EDIRC
endogenous growth; sustainability of government budget deficits; welfare effects;
Other versions of this item:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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