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Welfare, stabilization, or growth: a comparison of different fiscal objectives

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  • Steven P. Cassou
  • Kevin J. Lansing

Abstract

An argument that stabilization produces welfare levels nearly identical to those of welfare maximation, and that both these policies yield large welfare gains and modest growth losses relative to growth maximization policies.

Suggested Citation

  • Steven P. Cassou & Kevin J. Lansing, 1996. "Welfare, stabilization, or growth: a comparison of different fiscal objectives," Working Paper 9614, Federal Reserve Bank of Cleveland.
  • Handle: RePEc:fip:fedcwp:9614
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
    3. Hercowitz, Zvi & Sampson, Michael, 1991. "Output Growth, the Real Wage, and Employment Fluctuations," American Economic Review, American Economic Association, vol. 81(5), pages 1215-1237, December.
    4. Chari, V V & Christiano, Lawrence J & Kehoe, Patrick J, 1994. "Optimal Fiscal Policy in a Business Cycle Model," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 617-652, August.
    5. Christiano, Lawrence J., 1984. "A reexamination of the theory of automatic stabilizers," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 20(1), pages 147-206, January.
    6. 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.
    7. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
    8. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
    9. 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.
    10. Zhu, Xiaodong, 1992. "Optimal fiscal policy in a stochastic growth model," Journal of Economic Theory, Elsevier, vol. 58(2), pages 250-289, December.
    11. Robert J. Barro & Xavier Sala-I-Martin, 1992. "Public Finance in Models of Economic Growth," Review of Economic Studies, Oxford University Press, vol. 59(4), pages 645-661.
    12. Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 55-93.
    13. Cassou, Steven P. & Lansing, Kevin J., 1998. "Optimal fiscal policy, public capital, and the productivity slowdown," Journal of Economic Dynamics and Control, Elsevier, vol. 22(6), pages 911-935, June.
    14. Christiano, Lawrence J., 1988. "Why does inventory investment fluctuate so much?," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 247-280.
    15. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
    16. Greenwood, Jeremy & Huffman, Gregory W., 1991. "Tax analysis in a real-business-cycle model : On measuring Harberger triangles and Okun gaps," Journal of Monetary Economics, Elsevier, vol. 27(2), pages 167-190, April.
    17. Kenneth J. Arrow, 1962. "The Economic Implications of Learning by Doing," Review of Economic Studies, Oxford University Press, vol. 29(3), pages 155-173.
    18. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
    19. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-417, June.
    20. Kocherlakota, Narayana R. & Yi, Kei-Mu, 1995. "Can convergence regressions distinguish between exogenous and endogenous growth models?," Economics Letters, Elsevier, vol. 49(2), pages 211-215, August.
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    Citations

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    Cited by:

    1. M. Toseef Azid, 2010. "The role of technology spillovers in convergence," Humanomics: The International Journal of Systems and Ethics, Emerald Group Publishing, vol. 26(1), pages 53-64, February.
    2. Matheron, Julien, 2002. "The welfare cost of monopolistic competition revisited," Economics Letters, Elsevier, vol. 75(1), pages 129-133, March.
    3. Keith Blackburn & Dimitrios Varvarigos, 2008. "Human capital accumulation and output growth in a stochastic environment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 36(3), pages 435-452, September.
    4. K Blackburn & D Varvarigos, 2006. "Human Capital Accumulation in a Stochastic Environment: Some New Results on the Relationship Between Growth and Volatility," Centre for Growth and Business Cycle Research Discussion Paper Series 74, Economics, The Univeristy of Manchester.
    5. Dimitrios Varvarigos, 2006. "On stabilisation policy: Are there conflicting implications for growth and welfare?," Discussion Paper Series 2006_19, Department of Economics, Loughborough University, revised Jul 2006.
    6. Keith Blackburn & Dimitrios Varvarigos, 2006. "Human Capital Accumulation in a Stochastic Environment: Some New Results on the Relationship Between Growth and Volatility," The School of Economics Discussion Paper Series 0618, Economics, The University of Manchester.
    7. Marrero, Gustavo A. & Novales, Alfonso, 2007. "Income taxes, public investment and welfare in a growing economy," Journal of Economic Dynamics and Control, Elsevier, vol. 31(10), pages 3348-3369, October.

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    Keywords

    Fiscal policy;

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