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Characterizing the Optimal Composition of Government Expenditures

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Author Info
Rafaela Mª Pérez Sánchez (Universidad Complutense de Madrid. Facultad de CC. Económicas y Empresariales. Dpto. Fundamentos Análisis Económico I.)

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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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Paper provided by Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales in its series Documentos del Instituto Complutense de Análisis Económico with number 0409.

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Date of creation: 2004
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Handle: RePEc:ucm:doicae:0409

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  6. Lau, Sau-Him Paul, 1995. "Welfare-maximizing vs. growth-maximizing shares of government investment and consumption," Economics Letters, Elsevier, vol. 47(3-4), pages 351-359, March. [Downloadable!] (restricted)
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