Optimal Fiscal Policy, Public Capital and the Productivity Slowdown
Kevin J. Lansing
Federal Reserve Bank of San Francisco; Norges Bank
Steven P. Cassou
Kansas State University - Department of Economics
This paper develops a quantitative theoretical model for the optimal provision of public capital. We show that the ratio of public to private capital in the U.S. economy since 1925 evolves in a manner that is broadly consistent with an optimal transition path derived from a simple growth model. The model is used to quantify the conditions under which an increase in the stock of public capital is desirable and to investigate the degree to which non-optimal fiscal policies can account for the U.S. productivity slowdown.
Number of Pages in PDF File: 33
JEL Classification: E62, H40, H54, O41, E13working papers series
Date posted: October 28, 1996
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