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Fiscal Federalism, Public Capital Formation, and Endogenous Growth

  • Liutang Gong

    ()

    (Guanghua School of Management, Peking University
    Institute for Advanced Study, Wuhan University)

  • Heng-fu Zou

    ()

    (Guanghua School of Management, Peking University
    Institute for Advanced Study, Wuhan University
    Development Research Group, The World Bank)

This paper extends the Barro (1990) growth model with one aggregate government spending and one flat income tax to include federal and local public consumption, federal and local public capital formation, federal and local taxes, and federal transfers to locality. It derives the rate of endogenous growth and examines how the growth rate and welfare respond to changes in federal taxes, local taxes, and federal transfers.

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File URL: http://down.aefweb.net/WorkingPapers/w488.pdf
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Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 488.

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Length: 20 pages
Date of creation: 2011
Date of revision:
Publication status: Published in Annals of Economics and Finance, Society for AEF, vol. 4(2), pages 471-490, November.
Handle: RePEc:cuf:wpaper:488
Contact details of provider: Web page: http://cema.cufe.edu.cn/

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  1. Shantayanan Devarajan & Danyang Xie & Heng-Fu Zou, 2002. "Should Public Capital Be Subsidized or Provided?," Macroeconomics 0212005, EconWPA.
  2. Easterly, William & Rebelo, Sérgio, 1994. "Fiscal Policy and Economic Growth: An Empirical Investigation," CEPR Discussion Papers 885, C.E.P.R. Discussion Papers.
  3. King, Robert G & Rebelo, Sergio, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S126-50, October.
  4. Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers 130, University of Rochester - Center for Economic Research (RCER).
  5. Zou Heng-fu, 1994. "Dynamic Effects of Federal Grants on Local Spending," Journal of Urban Economics, Elsevier, vol. 36(1), pages 98-115, July.
  6. Zhang, Tao & Zou, Heng-fu, 1998. "Fiscal decentralization, public spending, and economic growth in China," Journal of Public Economics, Elsevier, vol. 67(2), pages 221-240, February.
  7. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
  8. Liutang Gong & Heng‐Fu Zou, 2011. "Public Expenditures, Taxes, Federal Transfers, and Endogenous Growth," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(6), pages 973-991, December.
  9. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  10. Gong, Liutang & Zou, Heng-fu, 2002. "Optimal taxation and intergovernmental transfer in a dynamic model with multiple levels of government," Journal of Economic Dynamics and Control, Elsevier, vol. 26(12), pages 1975-2003, October.
  11. Glomm, Gerhard & Ravikumar, B., 1994. "Public investment in infrastructure in a simple growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1173-1187, November.
  12. Zou, Heng-fu, 1996. "Taxes, Federal Grants, Local Public Spending, and Growth," Journal of Urban Economics, Elsevier, vol. 39(3), pages 303-317, May.
  13. Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association, vol. 46(2), pages 207-27, June.
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