Economic Growth, Public Debt and Welfare: Comparing Three Budgetary Rules

28 Pages Posted: 6 Mar 2009 Last revised: 30 Dec 2012

See all articles by Alfred Greiner

Alfred Greiner

Bielefeld University - Department of Business Administration and Economics

Date Written: March 5, 2009

Abstract

We present an endogenous growth model with externalities of capital and elastic labour supply where we allow for public debt and public spending that is welfare enhancing. We analyze effects of different debt policies on stability and how these policies affect long-run growth and welfare. The following budgetary rules are considered: The balanced budget rule, a budgetary rule where debt grows in the long-run but at a rate lower than the balanced growth rate and a rule where public debt grows at the same rate as all other economic variables but that guarantees that the inter-temporal budget constraint is fulfilled.

Keywords: Inter-temporal Budget Constraint, Balanced Budget, Endogenous Growth, Welfare, Stability

JEL Classification: E62, H61, O41

Suggested Citation

Greiner, Alfred, Economic Growth, Public Debt and Welfare: Comparing Three Budgetary Rules (March 5, 2009). Available at SSRN: https://ssrn.com/abstract=1354035 or http://dx.doi.org/10.2139/ssrn.1354035

Alfred Greiner (Contact Author)

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

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Bielefeld, 33501
Germany
+49 521 106 4859 (Phone)
+49 521 106 67120 (Fax)

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

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