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.
|Date of creation:||2011|
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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.
- 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.
- Robin Boadway, "undated".
"The Role of Second-Best Theory in Public Economics,"
EPRU Working Paper Series
95-06, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- Robin W. Boadway, 1994. "The Role of Second-Best Theory in Public Economics," Working Papers 910, Queen's University, Department of Economics.
- Sugata Ghosh & Udayan Roy, 2004. "Fiscal policy, long-run growth, and welfare in a stock-flow model of public goods," Canadian Journal of Economics, Canadian Economics Association, vol. 37(3), pages 742-756, August.
- Tsoukis, Chris & Miller, Nigel J., 2003. "Public services and endogenous growth," Journal of Policy Modeling, Elsevier, vol. 25(3), pages 297-307, April.
- 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)
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