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Macroeconomic Models and the Determination of Crowding Out

  • Spector, Lee C

The ongoing controversy between crowding out and Ricardian equivalence has led many economists to estimate more sophisticated macroeconomic models. Such models can involve the governments budget constraint, the public capital hypothesis or the impact of government expenditures on private contributions to public goods. This paper demonstrates that such models often lead to the same reduced form equations with identical econometric results. However, the interpretation of these empirical results will depend crucially on the underlying model. It is concluded that the resolution of the crowding out controversy involves, in part, a better understanding of the structural foundations of the macroeconomic economy.

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Article provided by in its journal Public Finance = Finances publiques.

Volume (Year): 54 (1999)
Issue (Month): 1-2 ()
Pages: 84-98

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Handle: RePEc:pfi:pubfin:v:54:y:1999:i:1-2:p:84-98
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