Dynamic Aspect of Growth and Fiscal Policy
We develop an endogenous growth model driven by externalities of both private capital and public infrastructure. The government levies distortionary taxation to finance a publicly provided consumption good and public infrastructure. Firms face adjustment costs. We first study the steady state, focusing in detail on the non-Ricardian aspects of the model. We then examine the optimal and time-consistent policies in a linear-quadratic approximation of the model. Although the time consistent equilibrium is also sub-optimal in terms of steady-state welfare, it does yield higher growth, through an accumulation of assets by the state and a cut of government consumption.
|Date of creation:||Mar 1996|
|Date of revision:||Nov 1997|
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2588, National Bureau of Economic Research, Inc.
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- 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).
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- repec:cup:cbooks:9780521104609 is not listed on IDEAS
- Devereux, Michael B & Love, David R F, 1995. "The Dynamic Effects of Government Spending Policies in a Two-Sector Endogenous Growth Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 232-56, February.
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