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A note on growth, welfare and public policy

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  • Ferreira, Pedro Cavalcanti

Abstract

In this note the growth anti welfare effects of fiscal anti monetary policies are investigated in three 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 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 anti the optimal rate of money creation is below the maximizing rate of growth.

Suggested Citation

  • Ferreira, Pedro Cavalcanti, 1997. "A note on growth, welfare and public policy," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 298, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:298
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