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Characterizing the Optimal Composition of Government Expenditures

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  • Rafaela Mª Pérez Sánchez

    (Universidad Complutense de Madrid. Facultad de CC. Económicas y Empresariales. Dpto. Fundamentos Análisis Económico I.)

Abstract

This paper extends the neoclassical growth model with productive public capital by including an infrastructure efficiency index, which is assumed to depend on a public choice variable, in particular, the share of public spending allocated to productive public consumption. A golden rule for the allocation of public expenditure between productive consumption and investment is specified. Under this framework, the observed path for the stock of infrastructures and the proposed efficiency index in the US economy during the last fifty years have been close to optimal: a lower stock of infrastructures has been accumulated, but it has been used more efficiently.

Suggested Citation

  • Rafaela Mª Pérez Sánchez, 2004. "Characterizing the Optimal Composition of Government Expenditures," Documentos de Trabajo del ICAE 0409, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    • Handle: RePEc:ucm:doicae:0409
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    Cited by:

    1. Jordi Caballé & Jana Hromcová, 2011. "The Role of Central Bank Operating Procedures in an Economy with Productive Government Spending," Computational Economics, Springer;Society for Computational Economics, vol. 37(1), pages 39-65, January.

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    More about this item

    Keywords

    Neoclassical growth model; Public spending.;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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