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Fiscal policy, long‐run growth, and welfare in a stock‐flow model of public goods
Author(s) -
Ghosh Sugata,
Roy Udayan
Publication year - 2004
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/j.0008-4085.2004.00245.x
Subject(s) - economics , public capital , public spending , public investment , fiscal policy , endogenous growth theory , stock (firearms) , welfare , investment (military) , monetary economics , tax rate , revenue , outcome (game theory) , public economics , finance , microeconomics , human capital , market economy , mechanical engineering , engineering , politics , political science , law
. We introduce public capital and public services as inputs in an endogenous growth model. We show that the growth rate depends on the apportionment of tax revenues between the accumulation of public capital and the provision of public services. When public spending is financed by proportional income taxes, the growth rate, the level of public spending as a proportion of GDP, the level of investment in public capital as a proportion of total public spending, and the level of private investment as a proportion of total private spending all are lower in the equilibrium outcome than in the optimal outcome. JEL classification: E62, O40