A note on policy, the composition of public expenditures and economic growth
In this article we study the growth and welfare effects of fiscal and monetary policies in economies where public investment is part of the productive process we present four different models that share the same technology with public infrastructure as a separate argument of the production function. We show that growth is maximized at positive levels of income tax and inflation. However, unless there are no transfers or public goods in the economy, maximization of growth does not imply welfare maximization we show that the optimal tax rate is greater than the rate that maximizes growth and the optimal rate of money creation is below the growth maximizing rate. With public infrastructure in the production function we no longer obtain superneutrality in the Sidrausky model.
|Date of creation:||May 1994|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://epge.fgv.br
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:fgv:epgewp:240. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Núcleo de Computação da EPGE)
If references are entirely missing, you can add them using this form.