Complementarity in Models of Public Finance and Endogenous Growth
This paper considers the effects of complementarity in private production between private and public inputs on optimal fiscal policy under the objective of growth maximization. Using an endogenous growth model with public finance and CES technology, it derives two central results. First, it shows that with complementarity, growth-maximizing fiscal policy is also affected by preference parameters, the degree of complementarity and the stock-flow properties of public inputs to private production. Second, it shows that optimal public spending composition and taxation are interrelated and also depend on the efficiency of public spending under growth maximization. Both results contrast with standard findings in the literature that are typically based on the assumption of Cobb-Douglas technology, and have important lessons for policy settings.
|Date of creation:||2014|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +64 (4) 463 5775
Fax: +64 (4) 463 5076
Web page: http://www.victoria.ac.nz/sacl/about/chair-in-public-finance
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.:
- Norman Gemmell & Florian Misch & Blanca Moreno-Dodson, 2012.
"Public Spending for Long-Run Growth : A Practitioners' View,"
World Bank Other Operational Studies
17061, The World Bank.
- Norman Gemmell & Florian Misch & Blanca Moreno-Dodson, 2012. "Public Spending for Long-Run Growth: A Practitioners’ View," World Bank - Economic Premise, The World Bank, issue 99, pages 1-4, December.
- Cecilia Garcia-Penalosa & Stephen Turnovsky, 2004.
"Second-Best Optimal Taxation of Capital and Labor in a Developing Economy,"
UWEC-2004-05-P, University of Washington, Department of Economics, revised Apr 2004.
- Garcia Penalosa, Cecilia & Turnovsky, Stephen J., 2005. "Second-best optimal taxation of capital and labor in a developing economy," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1045-1074, June.
- Cecilia Garcia Penalosa & Stephen J. Turnovsky, 2003. "Second-Best Optimal Taxation of Capital and Labor in a Developing Economy," IDEP Working Papers 0307, Institut d'economie publique (IDEP), Marseille, France.
- Christopher Heady & Åsa Johansson & Jens Arnold & Bert Brys & Laura Vartia, 2009.
"Tax Policy for Economic Recovery and Growth,"
Studies in Economics
0925, School of Economics, University of Kent.
- Santiago Acosta Ormaechea & Jiae Yoo, 2012. "Tax Composition and Growth: A Broad Cross-Country Perspective," IMF Working Papers 12/257, International Monetary Fund.
- 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.
- 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.
- Todd D. Mattina & Victoria Gunnarsson, 2007. "Budget Rigidity and Expenditure Efficiency in Slovenia," IMF Working Papers 07/131, International Monetary Fund.
- John Creedy, 2009. "The Personal Income Tax Structure: Theory and Policy," Department of Economics - Working Papers Series 1063, The University of Melbourne.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:vuw:vuwcpf:3136. 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: (Library Technology Services)
If references are entirely missing, you can add them using this form.