Growth and Welfare Effects of Fiscal Policy in an Endogenous Growth Model with Public Investment

International Tax and Public Finance, Vol. 5, Issue 3, 1998

Posted: 23 Sep 1998

See all articles by Alfred Greiner

Alfred Greiner

Bielefeld University - Department of Business Administration and Economics

Horst Hanusch

University of Augsburg - Faculty of Business and Economics

Abstract

In this article we present an endogenous growth model with productive public investment in infrastructure capital. Further, we suppose that the government pays lump-sum transfers to the household and subsidizes private investment. First, we demonstrate that there exists a unique balanced growth path which is a saddle point. Then, we study growth and welfare effects of fiscal policy along the balanced growth path. In particular, we derive the growth maximizing income tax rate and study how that variable depends on other fiscal parameters. Further, growth effects of varying the investment subsidy rate and of transfer payments are also analyzed. In addition, we demonstrate that growth and welfare maximization generally are not equivalent goals in a second best environment.

Note: This is a description of the paper and not the actual abstract.

JEL Classification: O41, H20, E62

Suggested Citation

Greiner, Alfred and Hanusch, Horst, Growth and Welfare Effects of Fiscal Policy in an Endogenous Growth Model with Public Investment. International Tax and Public Finance, Vol. 5, Issue 3, 1998, Available at SSRN: https://ssrn.com/abstract=123449

Alfred Greiner (Contact Author)

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

P.O. Box 100131
Bielefeld, 33501
Germany
+49 521 106 4859 (Phone)
+49 521 106 67120 (Fax)

HOME PAGE: http://phoenix.wiwi.uni-bielefeld.de/lehrbereiche/vwl/wipol

Horst Hanusch

University of Augsburg - Faculty of Business and Economics ( email )

Augsburg, 86135
Germany

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