Fiscal Policy in an Endogenous Growth Model with Public Capital: How Important are Transition Dynamics?

CEM Working Paper No. 59

27 Pages Posted: 27 Oct 2003  

Alfred Greiner

Bielefeld University - Department of Business Administration and Economics

Date Written: June 10, 2003

Abstract

This paper studies growth and welfare effects of fiscal policy in an endogenous growth model with productive public capital where we consider both distortionary and non-distortionary taxation in the model simultaneously. Analyzing the model it is assumed that the economy originally is on the balanced growth path when the government changes its fiscal parameters. The paper then studies growth and welfare effects of varying fiscal parameters both for the balanced growth path as well as for the economy on the transition path. It is demonstrated that the long-run effects may be different from effects on the transition path. Further, economic conditions explaining the results are presented.

Keywords: Fiscal Policy, Public Capital, Endogenous Growth, Transition Dynamics

JEL Classification: E62, O41

Suggested Citation

Greiner, Alfred, Fiscal Policy in an Endogenous Growth Model with Public Capital: How Important are Transition Dynamics? (June 10, 2003). CEM Working Paper No. 59. Available at SSRN: https://ssrn.com/abstract=455320 or http://dx.doi.org/10.2139/ssrn.455320

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

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