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A note on Growth, Welfare and public policy

Author

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  • Pedro Cavalcanti Ferreira

Abstract

ln this note the growth and welfare effects of fiscal and monetary policies are investigated in four economies where public investment is part of the productive process. It is shown that growth is maximized at positive levels of income tax and inflation but that there is no direct relationship between government size, productivity and growth or between inflation and growth. However, unless there are no transfers, no political conflict or public goods in the economy, maximization of growth does not imply welfare maximization and the optimal tax rate and government size are greater than those that maximize growth. Money is not superneutral and the optimal rate of money creation is below the maximizing rate of growth. JEL Classification: O41; H30.

Suggested Citation

  • Pedro Cavalcanti Ferreira, 2001. "A note on Growth, Welfare and public policy," Brazilian Journal of Political Economy, Center of Political Economy, vol. 21(1), pages 106-122.
    • Handle: RePEc:ekm:repojs:v:21:y:2001:i:1:p:106-122:id:967
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    More about this item

    Keywords

    Public expenditure; investment; economic growth;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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