IDEAS home Printed from https://ideas.repec.org/a/nwe/eajour/y2018i2p175-191.html
   My bibliography  Save this article

National Debt and Economic Growth with Externalities and Congestions

Author

Listed:
  • Wei-Bin Zhang

    (Ritsumeikan Asia Pacific University, Japan)

Abstract

The purpose of this study is to examine the dynamic interdependence between national debt and economic growth with externalities and congestions in public good in a generalized neoclassical threesector growth model. The economy has two production sectors and one public sector. We describe nonlinear dynamic interactions between growth, economic structural change, capital accumulation, externalities and congestions, and public debt under different combinations of taxes on the industrial good sector, the service sector, the wage income, the rate of interest, consumption of good, and consumption of service. We simulate the motion of the economic system and demonstrate the existence of two equilibrium points. The one equilibrium point with higher national output and capital is stable, and the other one with lower national output and capital is unstable. We examine how the stable and unstable paths react to changes.

Suggested Citation

  • Wei-Bin Zhang, 2018. "National Debt and Economic Growth with Externalities and Congestions," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 2, pages 175-191, June.
    • Handle: RePEc:nwe:eajour:y:2018:i:2:p:175-191
    as

    Download full text from publisher

    File URL: https://www.unwe.bg/uploads/Alternatives/Wei_EAlternativi_2_2018-2.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Barro, Robert J & Mankiw, N Gregory & Sala-i-Martin, Xavier, 1995. "Capital Mobility in Neoclassical Models of Growth," American Economic Review, American Economic Association, vol. 85(1), pages 103-115, March.
    3. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    4. Turnovsky, Stephen J, 2004. "The Transitional Dynamics of Fiscal Policy: Long-Run Capital Accumulation and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(5), pages 883-910, October.
    5. Philippe Michel & Leopold Von Thadden & Jean‐Pierre Vidal, 2010. "Debt Stabilizing Fiscal Rules," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(5), pages 923-941, October.
    6. Wijkander, Hans, 1984. "Provision of public goods in congested cities," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 127-141, November.
    7. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    8. Guo, Jang-Ting & Harrison, Sharon G., 2004. "Balanced-budget rules and macroeconomic (in)stability," Journal of Economic Theory, Elsevier, vol. 119(2), pages 357-363, December.
    9. Turnovsky, Stephen J & Sen, Partha, 1991. "Fiscal Policy, Capital Accumulation, and Debt in an Open Economy," Oxford Economic Papers, Oxford University Press, vol. 43(1), pages 1-24, January.
    10. Schmitt-Grohe, Stephanie & Uribe, Martin, 1997. "Balanced-Budget Rules, Distortionary Taxes, and Aggregate Instability," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 976-1000, October.
    11. Judd, Kenneth L, 1987. "A Dynamic Theory of Factor Taxation," American Economic Review, American Economic Association, vol. 77(2), pages 42-48, May.
    12. Daniel Cohen & Jeffrey Sachs, 1991. "Growth and External Debt Under Risk of Debt Repudiation," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 437-472, National Bureau of Economic Research, Inc.
    13. Farmer, Roger E. A., 1986. "Deficits and cycles," Journal of Economic Theory, Elsevier, vol. 40(1), pages 77-88, October.
    14. Hochman, Oded, 1981. "Land rents, optimal taxation and local fiscal independence in an economy with local public goods," Journal of Public Economics, Elsevier, vol. 15(1), pages 59-85, February.
    15. Shuanglin Lin, 2000. "Government Debt and Economic Growth in an Overlapping Generations Model," Southern Economic Journal, John Wiley & Sons, vol. 66(3), pages 754-763, January.
    16. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521001151, January.
    17. Mankiw, N. Gregory & Weinzierl, Matthew, 2006. "Dynamic scoring: A back-of-the-envelope guide," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1415-1433, September.
    18. Turnovsky, Stephen J., 1990. "The effects of taxes and dividend policy on capital accumulation and macroeconomic behavior," Journal of Economic Dynamics and Control, Elsevier, vol. 14(3-4), pages 491-521, October.
    19. Buiter, Willem H, 1988. "Death, Birth, Productivity Growth and Debt Neutrality," Economic Journal, Royal Economic Society, vol. 98(391), pages 279-293, June.
    20. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    21. Chalk, Nigel A., 2000. "The sustainability of bond-financed deficits: An overlapping generations approach," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 293-328, April.
    22. Turnovsky, Stephen J., 2000. "Fiscal policy, elastic labor supply, and endogenous growth," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 185-210, February.
    23. Chryssi Giannitsarou, 2007. "Balanced Budget Rules and Aggregate Instability: The Role of Consumption Taxes," Economic Journal, Royal Economic Society, vol. 117(523), pages 1423-1435, October.
    24. Zhang, Wei-Bin, 1993. "A woman's labor participation and economic growth : Creativity, knowledge utilization and family preference," Economics Letters, Elsevier, vol. 42(1), pages 105-110.
    25. wei-bin zhang, 2016. "Public Debt and Economic Growth in Uzawa?s Two-Sector Model with Public Goods," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 5(4), pages 51-72, December.
    26. Hyun Park, 2009. "Ramsey fiscal policy and endogenous growth," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 39(3), pages 377-398, June.
    27. Semmler, Willi & Sieveking, Malte, 2000. "Critical debt and debt dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 1121-1144, June.
    28. Shuanglin Lin, 2000. "Government Debt and Economic Growth in an Overlapping Generations Model," Southern Economic Journal, Southern Economic Association, vol. 66(3), pages 754-763, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. wei-bin zhang, 2016. "Public Debt and Economic Growth in Uzawa?s Two-Sector Model with Public Goods," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 5(4), pages 51-72, December.
    2. Wei-Bin Zhang, 2017. "Governments’ Debts And Public Goods In A Multi-Country. Growth Model With Tradable And Non-Tradable Goods," Journal of Smart Economic Growth, , vol. 2(2), pages 1-34, May.
    3. Philippe Michel & Leopold Von Thadden & Jean‐Pierre Vidal, 2010. "Debt Stabilizing Fiscal Rules," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(5), pages 923-941, October.
    4. Diego Martínez López, 2002. "Crecimiento y capital público desde una perspectiva regional: Una extensión del modelo de Barro," Revista de Estudios Regionales, Universidades Públicas de Andalucía, vol. 3, pages 75-92.
    5. Martin Zagler & Georg Dürnecker, 2003. "Fiscal Policy and Economic Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 397-418, July.
    6. Albulena Ukimeraj, 2016. "Professional Ethics and Disciplinary System in the KCA," European Journal of Economics and Business Studies Articles, Revistia Research and Publishing, vol. 2, ejes_v2_i.
    7. Long, Xin & Pelloni, Alessandra, 2017. "Factor income taxation in a horizontal innovation model," Journal of Public Economics, Elsevier, vol. 154(C), pages 137-159.
    8. Xavier Sala-i-Martin, 1990. "Lecture Notes on Economic Growth(I): Introduction to the Literature and Neoclassical Models," NBER Working Papers 3563, National Bureau of Economic Research, Inc.
    9. Shaheen Naseer, 2019. "Public Spending, Quality of Bureaucracy and Economic Growth: A Theoretical Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 58(2), pages 203-221.
    10. Long Xin & Pelloni Alessandra, 2011. "Welfare improving taxation on savings in a growth model," wp.comunite 0091, Department of Communication, University of Teramo.
    11. Alogoskoufis, G.S. & van der Ploeg, F., 1991. "Money and growth revisited," Discussion Paper 1991-9, Tilburg University, Center for Economic Research.
    12. Wei-Bin Zhang, 2020. "Optimal Taxation in the Solow-Uzawa Growth Model with Public Goods," Journal of Social and Development Sciences, AMH International, vol. 10(3), pages 1-11.
    13. Klaus Waelde, 1994. "Trade pattern reversal: The role of technological change, factor accumulation and government intervention," International Trade 9403003, University Library of Munich, Germany, revised 06 Apr 1994.
    14. Dimitrios Paparas & Christian Richter, 2015. "Fiscal policy and economic growth: Empirical evidence from the European Union," Working Papers 2015.06, International Network for Economic Research - INFER.
    15. Aschauer, David Alan, 2000. "Public Capital and Economic Growth: Issues of Quantity, Finance, and Efficiency," Economic Development and Cultural Change, University of Chicago Press, vol. 48(2), pages 391-406, January.
    16. Stephen J. Turnovsky, 2000. "Growth in an open economy: some recent developments," Working Paper Research 05, National Bank of Belgium.
    17. Halkos, George & Paizanos, Epameinondas, 2015. "Fiscal policy and economic performance: A review of the theoretical and empirical literature," MPRA Paper 67737, University Library of Munich, Germany.
    18. Oukhallou, Youssef, 2016. "Analyzing economic growth: what role for public investment?," MPRA Paper 69772, University Library of Munich, Germany.
    19. Wei-Bin ZHANG, 2018. "Corruption, governments’ debts, trade, and global growth," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(615), S), pages 27-50, Summer.
    20. Kerim Peren Arin & Emin Gahramanov & Tolga Omay & Xueli Tang & Mehmet A. Ulubasoglu, 2024. "A tale of two taxes: State‐dependency of tax policy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 71(1), pages 1-27, February.

    More about this item

    Keywords

    economic structure; externalities; congestion; national debt;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nwe:eajour:y:2018:i:2:p:175-191. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Vanya Lazarova (email available below). General contact details of provider: https://edirc.repec.org/data/unweebg.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.