Economic Growth With Optimal Public Spending Compositional
This paper uses a one-sector, endogenous growth model to study optimal composition between public investment and consumption in government expenditure and its relationships with economic growth. Assuming a benevolent government which maximizes a representative household’s lifetime utilities, the paper determines the unique, interior public investment share in government’s budgets, which is determined by policy and structural parameters. It finds that the conventional determinants of economic growth now generate stronger growth effects, via their indirect impacts upon optimal public spending composition. The effects emerge from raising the marginal utility of private consumption, relative to the marginal utility of public consumption, thereby inducing public investment and increasing economic growth. Our quantitative results suggest that the growth effect is sizable. The large growth effect via optimal public investment in our model has implications to East Asian economic growth miracles where public investment share and economic growth are both higher than other area’s countries.
|Date of creation:||Dec 2003|
|Date of revision:|
|Contact details of provider:|| Phone: 886-2-27822791|
Web page: http://www.econ.sinica.edu.tw/index.php?foreLang=en
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Sergio T. Rebelo, 1990.
"Long Run Policy Analysis and Long Run Growth,"
NBER Working Papers
3325, National Bureau of Economic Research, Inc.
- 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.
- David Aschauer, 1988.
"Is public expenditure productive?,"
88-7, Federal Reserve Bank of Chicago.
- Theodore Palivos & Chong K. Yip, 1995.
"Government Expenditure Financing in an Endogenous Growth Model: A Comparison,"
Departmental Working Papers
_057, Chinese University of Hong Kong, Department of Economics.
- Palivos, Theodore & Yip, Chong K, 1995. "Government Expenditure Financing in an Endogenous Growth Model: A Comparison," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1159-78, November.
- Theodore Palivos & Chong K. Yip, 1994. "Government expenditure financing in an endogenous growth model: a comparison," Working Paper 94-1, Federal Reserve Bank of Atlanta.
- Bond, Eric W. & Wang, Ping & Yip, Chong K., 1996.
"A General Two-Sector Model of Endogenous Growth with Human and Physical Capital: Balanced Growth and Transitional Dynamics,"
Journal of Economic Theory,
Elsevier, vol. 68(1), pages 149-173, January.
- Eric W. Bond & Ping Wang & Chong K. Yip, 1993. "A general two-sector model of endogenous growth with human and physical capital: balanced growth and transitional dynamics," Research Paper 9324, Federal Reserve Bank of Dallas.
- Stephen Turnovsky, 1998.
"Fiscal Policy, Elastic Labor Supply, and Endogenous Growth,"
Discussion Papers in Economics at the University of Washington
0068, Department of Economics at the University of Washington.
- Turnovsky, Stephen J., 2000. "Fiscal policy, elastic labor supply, and endogenous growth," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 185-210, February.
- Stephen Turnovsky, 1998. "Fiscal Policy, Elastic Labor Supply, and Endogenous Growth," Working Papers 0068, University of Washington, Department of Economics.
- Karl Shell, 2010. "A Model of Inventive Activity and Capital Accumulation," Levine's Working Paper Archive 1409, David K. Levine.
- 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.
- 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.
- Ellis W. Tallman & Ping Wang, 1990.
"Human capital and endogenous growth: evidence from Taiwan,"
90-9, Federal Reserve Bank of Atlanta.
- Tallman, Ellis W. & Wang, Ping, 1994. "Human capital and endogenous growth evidence from Taiwan," Journal of Monetary Economics, Elsevier, vol. 34(1), pages 101-124, August.
- Lee, Jisoon, 1992. "Optimal size and composition of government spending," Journal of the Japanese and International Economies, Elsevier, vol. 6(4), pages 423-439, December.
- Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
- Mino, Kazuo, 1996. "Analysis of a Two-Sector Model of Endogenous Growth with Capital Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 227-51, February.
- Devereux, Michael B. & Wen, Jean-Francois, 1998. "Political instability, capital taxation, and growth," European Economic Review, Elsevier, vol. 42(9), pages 1635-1651, November.
- 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.
- Devarajan, Shantayanan & Swaroop, Vinaya & Heng-fu, Zou, 1996.
"The composition of public expenditure and economic growth,"
Journal of Monetary Economics,
Elsevier, vol. 37(2-3), pages 313-344, April.
- Shantayanan Devarajan & Vinaya Swaroop & Heng-fu Zou, 1996. "The composition of public expenditure and economic growth," CEMA Working Papers 77, China Economics and Management Academy, Central University of Finance and Economics.
- Chang, Wen-ya, 1999. "Government spending, endogenous labor, and capital accumulation," Journal of Economic Dynamics and Control, Elsevier, vol. 23(8), pages 1225-1242, August.
- Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
- Romano Piras, 2001. "Government Spending Composition in an Endogenous Growth Model with Congestion," Metroeconomica, Wiley Blackwell, vol. 52(1), pages 121-136, 02.
When requesting a correction, please mention this item's handle: RePEc:sin:wpaper:03-a007. 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: (HsiaoyunLiu)
If references are entirely missing, you can add them using this form.