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Optimal Fiscal Policy In A Growing Economy With Public Capital

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  • GÓMEZ, MANUEL A.

Abstract

This paper devises a fiscal policy by means of which the first-best optimal equilibrium can be attained as a market equilibrium in an endogenous growth model with public capital. The optimal equilibrium requires that public (private) investment be zero along the transition to the balanced growth path if the initial ratio of public to private capital is higher (lower) than its long-term value. We also show that the transitional dynamics can be determined by noting that the continuity of the shadow prices involves the continuity of the consumption path.

Suggested Citation

  • Gã“Mez, Manuel A., 2004. "Optimal Fiscal Policy In A Growing Economy With Public Capital," Macroeconomic Dynamics, Cambridge University Press, vol. 8(4), pages 419-435, September.
  • Handle: RePEc:cup:macdyn:v:8:y:2004:i:04:p:419-435_03
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    Cited by:

    1. Maebayashi, Noritaka & Hori, Takeo & Futagami, Koichi, 2017. "Dynamic Analysis Of Reductions In Public Debt In An Endogenous Growth Model With Public Capital," Macroeconomic Dynamics, Cambridge University Press, vol. 21(6), pages 1454-1483, September.
    2. Hashimzade, Nigar & Myles, Gareth D., 2010. "Growth And Public Infrastructure," Macroeconomic Dynamics, Cambridge University Press, vol. 14(S2), pages 258-274, November.
    3. Hossein Kavand & J. Stephen Ferris, 2012. "An Oil-Driven Endogenous Growth Model," Carleton Economic Papers 12-03, Carleton University, Department of Economics.
    4. T. Tamai, 2008. "Optimal fiscal policy in an endogenous growth model with public capital: a note," Journal of Economics, Springer, vol. 93(1), pages 81-93, February.
    5. Seiya Fujisaki, 2012. "Optimal fiscal policy with social status and productive government expenditure," Economics Bulletin, AccessEcon, vol. 32(1), pages 960-968.
    6. Andreas Irmen & Johanna Kühnel, 2008. "Productive Government Expenditure and Economic Growth," Working Papers 0464, University of Heidelberg, Department of Economics, revised May 2008.

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