Fiscal policy and growth with complementarities and constraints on government
This paper considers the implications of complementarity in private production and constraints on government for optimal fiscal policy. Using an endogenous growth model with public finance, it derives three central results which modify findings in the literature under standard assumptions. First, it shows that optimal public spending composition and taxation are interrelated so that first- and second-best fiscal policies differ. Second, it shows that the growth-maximizing fiscal policy is affected by preference parameters. Third, it shows that with budget rigidities and informational limitations, knowledge about the optimal fiscal policy parameter values is not necessary for growth-enhancing fiscal policy adjustments.
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- Florian Misch & Norman Gemmell & Richard Kneller, 2013.
"Growth and Welfare Maximization in Models of Public Finance and Endogenous Growth,"
Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 15(6), pages 939-967, December.
- Florian Misch & Norman Gemmell & Richard Kneller, "undated". "Growth and Welfare Maximization in Models of Public Finance and Endogenous Growth," Discussion Papers 08/09, University of Nottingham, CREDIT.
- Misch, Florian & Gemmell, Norman & Kneller, Richard, 2011. "Growth and welfare maximization in models of public finance and endogenous growth," ZEW Discussion Papers 11-041, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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- 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. Full references (including those not matched with items on IDEAS)