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Productive Government Spending, Patterns Of Specialization And Economic Growth In A Small Open Economy

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  • RYOJI OHDOI

Abstract

Constructing a two‐sector small open endogenous growth model with productive government spending, this paper examines patterns of specialization and the growth effects of fiscal policy. It is shown in this model that a change in income tax rate can cause a change in an equilibrium pattern of specialization. Because of this property, the relationship between the tax rate and the growth rate yields either a humped shape or a two‐humped shape, depending on world commodity prices. We also show that the growth maximizing tax rate is not necessarily equal to the tax rate that maximizes the level of social welfare.

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  • Ryoji Ohdoi, 2007. "Productive Government Spending, Patterns Of Specialization And Economic Growth In A Small Open Economy," The Japanese Economic Review, Japanese Economic Association, vol. 58(1), pages 127-146, March.
  • Handle: RePEc:bla:jecrev:v:58:y:2007:i:1:p:127-146
    DOI: 10.1111/j.1468-5876.2007.00344.x
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    File URL: https://doi.org/10.1111/j.1468-5876.2007.00344.x
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    Cited by:

    1. Takumi Naito & Ryoji Ohdoi, 2008. "Dynamics of a two-sector endogenous growth model with intersectoral knowledge spillovers," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 35(3), pages 599-605, June.
    2. Gupta, Manash Ranjan & Barman, Trishita Ray, 2015. "Environmental Pollution, Informal Sector, Public Expenditure And Economic Growth," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 56(1), pages 73-91, June.
    3. Hu, Yunfang & Ohdoi, Ryoji & Shimomura, Koji, 2008. "Indeterminacy in a two-sector endogenous growth model with productive government spending," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1104-1123, September.
    4. Trishita Ray Barman & Manash Ranjan Gupta, 2010. "Public Expenditure, Environment, and Economic Growth," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(6), pages 1109-1134, December.
    5. Gupta, Manash Ranjan & Barman, Trishita Ray, 2009. "Fiscal policies, environmental pollution and economic growth," Economic Modelling, Elsevier, vol. 26(5), pages 1018-1028, September.
    6. Yunfang Hu & Murray C. Kemp & Koji Shimomura, 2005. "A Factor Endowment Theory of Endogenous Growth and International Trade," Review of Development Economics, Wiley Blackwell, vol. 9(4), pages 467-481, November.
    7. Gupta, Manash Ranjan & Barman, Trishita Ray, 2010. "Health, infrastructure, environment and endogenous growth," Journal of Macroeconomics, Elsevier, vol. 32(2), pages 657-673, June.
    8. Antonio Soares Martins Neto & Gilberto Tadeu Lima, 2017. "Competitive Exchange Rate and Public Infrastructure in a Macrodynamic of Economic Growth," Metroeconomica, Wiley Blackwell, vol. 68(4), pages 792-815, November.
    9. Takumi Naito & Ryoji Ohdoi, 2011. "A two-country model of trade and growth with intersectoral knowledge spillovers," Journal of Economics, Springer, vol. 103(1), pages 39-58, May.

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