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The Conditions for a Balanced Growth in a Model with Public Finance: an Analytic Solution

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  • Carboni, Oliviero
  • Russu, Paolo

Abstract

This paper studies the equilibrium dynamics of a growth model with public finance where two different allocations of public resources are considered. The model simulta- neously determines the optimal shares of consumption, capital accumulation, taxes and composition of the two different public expenditures which maximize a representative household’s lifetime utilities for a centralized economy. The analysis supplies a closed form solution. Moreover, with one restriction on the parameters ( = ) we fully de- termine the solutions path for all variables of the model and determine the conditions for a balanced growth.

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File URL: http://mpra.ub.uni-muenchen.de/36600/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36600.

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Date of creation: 2011
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Handle: RePEc:pra:mprapa:36600

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Keywords: growth models; fiscal policy; public spending composition;

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  1. Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
  2. Arrow, Kenneth J. & Kurz, Mordecai, 1969. "Optimal public investment policy and controllability with fixed private savings ratio," Journal of Economic Theory, Elsevier, vol. 1(2), pages 141-177, August.
  3. 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.
  4. Robert J. Barro, 1991. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  5. Turnovsky, Stephen J. & Fisher, Walter H., 1995. "The composition of government expenditure and its consequences for macroeconomic performance," Journal of Economic Dynamics and Control, Elsevier, vol. 19(4), pages 747-786, May.
  6. Chilarescu, Constantin, 2008. "An analytical solutions for a model of endogenous growth," Economic Modelling, Elsevier, vol. 25(6), pages 1175-1182, November.
  7. Fisher, Walter H & Turnovsky, Stephen J, 1998. "Public Investment, Congestion, and Private Capital Accumulation," Economic Journal, Royal Economic Society, vol. 108(447), pages 399-413, March.
  8. Hiraguchi, Ryoji, 2009. "A note on the closed-form solution to the Lucas-Uzawa model with externality," Journal of Economic Dynamics and Control, Elsevier, vol. 33(10), pages 1757-1760, October.
  9. Futagami, Koichi & Morita, Yuichi & Shibata, Akihisa, 1993. " Dynamic Analysis of an Endogenous Growth Model with Public Capital," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 607-25, December.
  10. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
  11. Oliviero A. Carboni & Giuseppe Medda, 2011. "Size And Composition Of Public Spending In A Neoclassical Growth Model," Metroeconomica, Wiley Blackwell, vol. 62(1), pages 150-170, 02.
  12. Lee, Jisoon, 1992. "Optimal size and composition of government spending," Journal of the Japanese and International Economies, Elsevier, vol. 6(4), pages 423-439, December.
  13. Been-Lon Chen, 2006. "Economic growth with an optimal public spending composition," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 123-136, January.
  14. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  15. Turnovsky, Stephen J., 1997. "Fiscal Policy In A Growing Economy With Public Capital," Macroeconomic Dynamics, Cambridge University Press, vol. 1(03), pages 615-639, September.
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