Endogenous Growth, Government Debt and Budgetary Regimes

Posted: 22 Sep 2000

See all articles by Alfred Greiner

Alfred Greiner

Bielefeld University - Department of Business Administration and Economics

Willi Semmler

The New School - Department of Economics; Universitaet Bielefeld; IIASA

Abstract

In this paper we analyze an endogenous growth model in which sustained per capital growth results from investment in public capital and the government is allowed to borrow from the capital market. As to the government behavior, we do not suppose that governments optimize but instead stick to some well-defined budgetary regimes. The impact of a deficit-financed increase in productive government spending is analyzed. It is shown that the growth effect of this fiscal policy crucially depends on the budgetary regime in use. In particular, a stricter budgetary regime, that is, an economy where the public deficit is primarily used for public investment, does not necessarily imply a lower growth rate. Simulations demonstrate that the growth-maximizing income tax rate is about in the range of the elasticity of output with respect to public capital.

JEL Classification: E62

Suggested Citation

Greiner, Alfred and Semmler, Willi, Endogenous Growth, Government Debt and Budgetary Regimes. Journal of Macroeconomics, Vol. 22, No. 3, Summer 2000. Available at SSRN: https://ssrn.com/abstract=228958

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

Willi Semmler

The New School - Department of Economics ( email )

65 Fifth Avenue
New York, NY 10003
United States

HOME PAGE: http://www.newschool.edu/nssr/faculty/?id=4e54-6b79-4e41-3d3d

Universitaet Bielefeld ( email )

Universit├Ątsstra├če 25
Bielefeld, NRW
Germany

IIASA ( email )

Schlossplatz 1
Laxenburg/Austria, A-2361
Austria

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