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The Conditions for a Balanced Growth in a Model with Public Finance: an Analytic Solution


  • Carboni, Oliviero
  • Russu, Paolo


This paper studies the equilibrium dynamics of a growth model with public finance where two different allocations of public resources are considered. The model simulta- neously determines the optimal shares of consumption, capital accumulation, taxes and composition of the two different public expenditures which maximize a representative household’s lifetime utilities for a centralized economy. The analysis supplies a closed form solution. Moreover, with one restriction on the parameters ( = ) we fully de- termine the solutions path for all variables of the model and determine the conditions for a balanced growth.

Suggested Citation

  • Carboni, Oliviero & Russu, Paolo, 2011. "The Conditions for a Balanced Growth in a Model with Public Finance: an Analytic Solution," MPRA Paper 36600, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:36600

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    References listed on IDEAS

    1. Sugata Ghosh & Andros Gregoriou, 2008. "The composition of government spending and growth: is current or capital spending better?," Oxford Economic Papers, Oxford University Press, vol. 60(3), pages 484-516, July.
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    4. 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.
    5. Arrow, Kenneth J. & Kurz, Mordecai, 1969. "Optimal public investment policy and controllability with fixed private savings ratio," Journal of Economic Theory, Elsevier, vol. 1(2), pages 141-177, August.
    6. Hiraguchi, Ryoji, 2009. "A note on the closed-form solution to the Lucas-Uzawa model with externality," Journal of Economic Dynamics and Control, Elsevier, vol. 33(10), pages 1757-1760, October.
    7. 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.
    8. 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.
    9. Turnovsky, Stephen J. & Fisher, Walter H., 1995. "The composition of government expenditure and its consequences for macroeconomic performance," Journal of Economic Dynamics and Control, Elsevier, vol. 19(4), pages 747-786, May.
    10. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
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    14. Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
    15. Oliviero A. Carboni & Giuseppe Medda, 2011. "Size And Composition Of Public Spending In A Neoclassical Growth Model," Metroeconomica, Wiley Blackwell, vol. 62(1), pages 150-170, February.
    16. Chilarescu, Constantin, 2008. "An analytical solutions for a model of endogenous growth," Economic Modelling, Elsevier, vol. 25(6), pages 1175-1182, November.
    17. 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 607-625, December.
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    More about this item


    growth models; fiscal policy; public spending composition;

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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