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Fiscal Policy, Home Production and Growth Dynamics

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  • Hu, Yunfang
  • Mino, Kazuo

Abstract

Using an endogenous growth model with physical and human capital, we explore short-run as well as long-run effects of fiscal policy in the presence of households' production activities. We first show that our model has a unique balanced-growth path that satisfies saddlepoint stability. We then conduct fiscal policy experiments both in and out of the balanced-growth equilibrium. The main focus of the paper is to study the dynamic behavior of the model economy and the effects of fiscal actions analytically. In so doing, we examine how the presence of home production yields the policy implications that are different from those obtained in the standard setting that does not consider home production.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17017.

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Date of creation: Oct 2004
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Handle: RePEc:pra:mprapa:17017

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Keywords: fiscal policy; home production; multi-sector endogenous growth model.;

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  1. Caballe, Jordi & Santos, Manuel S, 1993. "On Endogenous Growth with Physical and Human Capital," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(6), pages 1042-67, December.
  2. Mino, Kazuo, 1996. "Analysis of a Two-Sector Model of Endogenous Growth with Capital Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 227-51, February.
  3. Manuel Santos & Salvador Ortigueira, . "Equilibrium Dynamics in a Two-Sector Model with Taxes," Working Papers, Department of Economics, W. P. Carey School of Business, Arizona State University 2133332, Department of Economics, W. P. Carey School of Business, Arizona State University.
  4. Larry E. Jones & Rodolfo E. Manuelli & Ellen R. McGrattan, 2003. "Why are married women working so much?," Staff Report, Federal Reserve Bank of Minneapolis 317, Federal Reserve Bank of Minneapolis.
  5. Greenwood, J. & Hercowitz, Z., 1991. "The Allocation of Capital and Time Over the Business Cycle," RCER Working Papers, University of Rochester - Center for Economic Research (RCER) 268, University of Rochester - Center for Economic Research (RCER).
  6. Einarsson Tor & Marquis Milton Harrison, 2001. "Fiscal Policy and Human Capital Accumulation in a Home Production Economy," The B.E. Journal of Macroeconomics, De Gruyter, De Gruyter, vol. 1(1), pages 1-33, July.
  7. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers, National Bureau of Economic Research, Inc 3325, National Bureau of Economic Research, Inc.
  8. Stephen L. Parente & Richard Rogerson & Randall Wright, 2000. "Homework in Development Economics: Household Production and the Wealth of Nations," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(4), pages 680-687, August.
  9. Salvador Ortigueira, 1997. "A Dynamic Analysis of an Endogenous Growth Model with Leisure," Working Papers, Centro de Investigacion Economica, ITAM 9705, Centro de Investigacion Economica, ITAM.
  10. Jess Benhabib & Richard Rogerson & Randall Wright, 1991. "Homework in macroeconomics: household production and aggregate fluctuations," Staff Report, Federal Reserve Bank of Minneapolis 135, Federal Reserve Bank of Minneapolis.
  11. Easterly, William & DEC, 1993. "How much do distortions affect growth?," Policy Research Working Paper Series, The World Bank 1215, The World Bank.
  12. Ladron-de-Guevara, Antonio & Ortigueira, Salvador & Santos, Manuel S, 1999. "A Two-Sector Model of Endogenous Growth with Leisure," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 66(3), pages 609-31, July.
  13. Ellen McGrattan & Richard Rogerson & Randall Wright, 1995. "An equilibrium model of the business cycle with household production and fiscal policy," Staff Report, Federal Reserve Bank of Minneapolis 191, Federal Reserve Bank of Minneapolis.
  14. Gian-Maria Milesi-Ferretti & Nouriel Roubini, 1995. "Growth Effects of Income and Consumption Taxes," IMF Working Papers, International Monetary Fund 95/62, International Monetary Fund.
  15. Antonio Ladron de Guevara & Salvador Ortigueira & Manuel S. Santos, 1994. "Equilibrium Dynamics in Two-Sector Models of Endogenous Growth," Working Papers, Centro de Investigacion Economica, ITAM 9403, Centro de Investigacion Economica, ITAM.
  16. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 3-42, July.
  17. Eisner, Robert, 1988. "Extended Accounts for National Income and Product," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 26(4), pages 1611-84, December.
  18. Eric W. Bond & Ping Wang & Chong K. Yip, 1993. "A general two-sector model of endogenous growth with human and physical capital: balanced growth and transitional dynamics," Research Paper, Federal Reserve Bank of Dallas 9324, Federal Reserve Bank of Dallas.
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