An Endogenous Growth Model with Public Capital and Sustainable Government Debt

17 Pages Posted: 9 Aug 2007

See all articles by Alfred Greiner

Alfred Greiner

Bielefeld University - Department of Business Administration and Economics

Abstract

This paper presents and analyses an endogenous growth model with public capital and public debt. It is assumed that the ratio of the primary surplus to gross domestic income is a positive linear function of the debt income ratio which assures that public debt is sustainable. The paper then derives necessary conditions for the existence of a sustainable balanced growth path for the analytical model. Further, simulations are undertaken in order to gain insight into stability properties of the model and in order to analyse growth effects of deficit financed increases in public investment. The latter is done for the model on the sustainable balanced growth path as well as for the model along the transition path.

Suggested Citation

Greiner, Alfred, An Endogenous Growth Model with Public Capital and Sustainable Government Debt. Japanese Economic Review, Vol. 58, No. 3, pp. 345-361, September 2007, Available at SSRN: https://ssrn.com/abstract=1005519 or http://dx.doi.org/10.1111/j.1468-5876.2007.00394.x

Alfred Greiner (Contact Author)

Bielefeld University - Department of Business Administration and Economics ( email )

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