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Excludable and Non-excludable Public Inputs: Consequences for Economic Growth

  • Ingrid Ott

    ()

    (Institute of Economics, University of Lüneburg)

  • Stephen J. Turnovsky

    ()

    (Department of Economics, University of Washington)

Many public goods are characterized by rivalry and/or excludability. This paper introduces both non-excludable and excludable public inputs into a simple endogenous growth model. We derive the equilibrium growth rate and design the optimal tax and user-cost structure. Our results emphasize the role of congestion in determining this optimal financing structure and the consequences this has in turn for the government’s budget. The latter consists of fee and tax revenues that are used to finance the entire public production input and that may or may not suffice to finance the entire public input, depending upon the degree of congestion. We extend the model to allow for monopoly pricing of the user fee by the government. Most of the analysis is conducted for general production functions consistent with endogenous growth, although the case of CES technology is also considered.

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Paper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 2.

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Length: 38 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:lue:wpaper:2
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  1. Theo S Eicher & Stephen Turnovsky, 1998. "Scale, Congestion, and Growth," Working Papers 0071, University of Washington, Department of Economics.
  2. Sala-I-Martin, X. & Barro, R.J., 1991. "Public Finance in Models of Economic Growth," Papers 640, Yale - Economic Growth Center.
  3. King, R.G. & Baxter, M., 1990. "Fiscal Policy In General Equilibrium," RCER Working Papers 244, University of Rochester - Center for Economic Research (RCER).
  4. 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.
  5. Fraser, Clive D., 1996. "On the provision of excludable public goods," Journal of Public Economics, Elsevier, vol. 60(1), pages 111-130, April.
  6. Stephen J. Turnovsky, 2000. "Methods of Macroeconomic Dynamics, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262201232, June.
  7. Ireland, Peter N., 1994. "Supply-side economics and endogenous growth," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 559-571, June.
  8. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
  9. Brennan, Goeffrey & Walsh, Cliff, 1985. "Private Markets in (Excludable) Public Goods: A Reexamination [Private Markets in Public Goods (or Qualities)]," The Quarterly Journal of Economics, MIT Press, vol. 100(3), pages 811-19, August.
  10. Steven P. Cassou & Kevin J. Lansing, 1995. "Optimal fiscal policy, public capital, and the productivity slowdown," Working Paper 9509, Federal Reserve Bank of Cleveland.
  11. Thompson, Earl A, 1974. "Taxation and National Defense," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 755-82, July/Aug..
  12. Bruce, Neil & Turnovsky, Stephen J, 1999. "Budget Balance, Welfare, and the Growth Rate: "Dynamic Scoring" of the Long-Run Government Budget," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(2), pages 162-86, May.
  13. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  14. Fisher, Walter H & Turnovsky, Stephen J, 1998. "Public Investment, Congestion, and Private Capital Accumulation," Economic Journal, Royal Economic Society, vol. 108(447), pages 399-413, March.
  15. Turnovsky, Stephen J., 1996. "Optimal tax, debt, and expenditure policies in a growing economy," Journal of Public Economics, Elsevier, vol. 60(1), pages 21-44, April.
  16. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
  17. 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).
  18. Annette Vissing-J�rgensen & Orazio P. Attanasio, 2003. "Stock-Market Participation, Intertemporal Substitution, and Risk-Aversion," American Economic Review, American Economic Association, vol. 93(2), pages 383-391, May.
  19. Brito, Dagobert L & Oakland, William H, 1980. "On the Monopolistic Provision of Excludable Public Goods," American Economic Review, American Economic Association, vol. 70(4), pages 691-704, September.
  20. Wassmer, Robert W. & Fisher, Ronald C., 2002. "Interstate variation in the use of fees to fund K-12 public education," Economics of Education Review, Elsevier, vol. 21(1), pages 87-100, February.
  21. Futagami, Koichi & Morita, Yuichi & Shibata, Akihisa, 1993. " Dynamic Analysis of an Endogenous Growth Model with Public Capital," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 607-25, December.
  22. Edwards, John H. Y., 1990. "Congestion function specification and the "publicness" of local public goods," Journal of Urban Economics, Elsevier, vol. 27(1), pages 80-96, January.
  23. Burns, Michael E & Walsh, Cliff, 1981. "Market Provision of Price-excludable Public Goods: A General Analysis," Journal of Political Economy, University of Chicago Press, vol. 89(1), pages 166-91, February.
  24. Turnovsky, Stephen J., 1997. "Fiscal Policy In A Growing Economy With Public Capital," Macroeconomic Dynamics, Cambridge University Press, vol. 1(03), pages 615-639, September.
  25. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
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