the effects of fiscal policy in a two country world economy an intertemporal analysis this paper analyzes the effects of fiscal policy using a two country general equilibrium model a key finding is that a shift in government spending from productive purchases to consumption purchases causes a rising trade deficit and an appreciation of the terms of trade consistent with the u s experiences in the 1980s productive public services play a critical role in these adjustments by driving a wedge between the rates of return on domestic and foreign capital a temporary cut in the capital income tax is also crucial for explaining a persistent trade deficit and an appreciation of the terms of trade copyright 1995 by ohio state university press

dynamic scoring alternative financing schemes abstract neoclassical growth models predict that reductions in capital or labor income tax rates are expansionary when lump sum transfers are used to balance the government budget this paper explores the consequences of bond financed tax reductions that bring forth a range of possible offsetting policies including future government consumption capital tax rates or labor tax rates through the resulting intertemporal distortions current tax cuts can be expansionary or contractionary the paper also finds that more aggressive responses of offsetting policies to debt engender less debt accumulation and less costly tax cuts

fiscal policy and growth in a small open economy with elastic labour supply endogenizing labour supply leads to fundamental changes in the equilibrium structure of the ak growth model of a small open economy the balanced growth equilibrium is described by two tradeoff loci relating the equilibrium growth rate to the fraction of time devoted to leisure the implications of endogenous labour supply for fiscal policy are addressed the effects of distortionary taxes and government expenditure on the equilibrium growth leisure employment tradeoff are analysed the responses contrast with both those of a closed economy having an elastic labour supply and an open economy with fixed labour supply optimal fiscal policy is also characterized jel classification f41 f43 politique fiscale et croissance dans une petite economie ouverte quand l offre de travail est elastique l endogeneisation de l offre de travail entraine des changements fondamentaux dans la structure d equilibre du modele de croissance du type ak d une petite economie ouverte l equilibre de croissance balancee est decrit par deux lieux de relations d equivalence reliant le taux de croissance d equilibre a la fraction du temps allouee au loisir on examine les implications de cette endogen6isation de l offre de travail pour la politique fiscale on analyse les effets de taxes distorsionnantes et des depenses gouvemementales sur la relation d 6equivalence entre taux de croissance et loisir et donc emploi on obtient des reactions differentes de celles qu on obtient en economie ferm6e quand l offre de travail est elastique et en economie ouverte quand l offre de travail est fixe on proc ede alors a la definition de la politique fiscale optimale

information processing and limited liability we study how limited liability affects the behavior of an agent who has to process information concerning what to do in a contingent event limited liability reduces the amount of information processed particularly about very bad highly unlikely events

increasing returns capital utilization and the effects of government spending abstract we show that a one sector real business cycle model with mild increasing returns to scale variable capital utilization and saddle path stability is able to produce qualitatively realistic business cycles driven solely by disturbances to government purchases due to an endogenous increase in labor productivity a positive spending shock can lead to simultaneous increases in output consumption investment employment and real wage our analysis illustrates a close relationship between this result and the recent literature that explores indeterminacy and sunspots in real business cycle models under laissez faire in particular the condition which governs the required magnitude of increasing returns for government spending shocks to generate procyclical macroeconomic effects is identical to that necessary for a laissez faire one sector real business cycle model to exhibit local indeterminacy

optimal taxation in models of endogenous growth we study the problem of optimal taxation in three infinite horizon representative agent endogenous growth models the first model is a convex model in which physical and human capital are perfectly symmetric our second model incorporates elastic labor supply through a lucas style technology analysis of these two models points out the danger of assuming that government expenditures are exogenous in our third model we include government expenditures as a productive input in capital formation showing that the limiting tax rate on capital is no longer zero in numerical simulations we find similar effects on growth and welfare in all three models

schooling and public capital in a model of endogenous growth this paper studies the allocation of public spending between education services and infrastructure investment in an endogenous growth model where public capital in infrastructure affects the process of human capital accumulation the balanced growth path is derived and the dynamics associated with a budget neutral reallocation of spending from education to infrastructure are studied through numerical simulations the growth maximizing tax rate is shown to depend only on the production technology as in standard flow models of public expenditure whereas the optimal share of infrastructure investment depends also on the productiveness of infrastructure relative to education services in the schooling technology

endogenous markups and the effects of income taxation theory and evidence from oecd countries abstract existing studies on the effects of fiscal policy under imperfect competition typically treat each firm s price cost markup as fixed this paper examines the implications of endogenising the markup in a simple model of income taxation under monopolistic competition it is demonstrated that an increase in income tax reduces the number of firms lessens competition among surviving firms and raises the optimal markups in the new steady state through this channel the effects of income taxation on the key macroeconomic variables as well as on consumer welfare are unambiguously enlarged the simple model prediction is largely supported by cross section regressions with data from oecd countries

is the relationship between financial development and economic growth monotonic evidence from a sample of middle income countries summary we revisit the relationship between financial development and economic growth in a panel of 52 middle income countries over the 1980 2008 period using pooled mean group estimations in a dynamic heterogeneous panel setting we show that there is an inverted u shaped relationship between finance and growth in the long run in the short run the relationship is insignificant this suggests that too much finance can exert a negative influence on growth in middle income countries the finding of a non monotonic effect of financial development on growth is confirmed by estimating a threshold model

uniqueness and indeterminacy on the dynamics of endogenous growth abstract in this paper we study the dynamics of endogenous growth both in the model of lucas and in a generalization that incorporates a labor leisure choice we characterize the regions of the parameter space that give rise to unique equilibria as well as the regions that yield a continuum of equilibria with positive growth rates we find that such multiple equilibria exist for empirically very plausible parameters in particular when the lucas model is modified to incorporate endogenous labor journal of economic literature numbers e00 e3 o40

real exchange rate technological catching up and spillovers in a balance of payments constrained growth model abstract the main objective of this work is to investigate the theoretical interrelationships between economic growth the national innovation system nis and the real exchange rate rer in an export led growth model formally this work presents new changes in the kaldor dixon thirlwal s model by the introduction of the rer the nis and a function that captures the endogeneity of productivity in the industrial sector in the short term the equilibrium growth rate depends on the real exchange rate level and of the nis development which responds to the size of the technological gap the public and private investments in r d in relation to the output growth rate ratio and the absorption capacity for technological spillovers in the long run assuming the constancy of all exogenous variables the convergence of the growth process depends on the output growth elasticity in relation to exports the price elasticity of exports and the elasticity of productivity growth relative to output growth of the economy in general and to industry in particular

ecological macroeconomics in the open economy sustainability unequal exchange and policy coordination in a center periphery model abstract this article introduces a novel environmental interpretation of a keynesian coordination game and develops four potential scenarios to remaining within a global carbon emissions constraint with inspiration from research on ecologically unequal exchange eue we demonstrate the drawbacks of present green growth strategies by considering how pollution and resource intensive industries are distributed unevenly in the world economy with large and increasing negative impacts on the periphery the situation may only be exacerbated if the reduction of emissions in the center is based on shifting heavy industries and extractive enterprises to low cost producers in the periphery in this way existing research likely overemphasizes the capacity of green investment policy to achieve sustainable outcomes our scenarios show that achieving global sustainability and improving global equity will require an impressive level of coordination between the center and periphery as well as a significant reduction in the rate of growth degrowth in the center

information rigidity and the expectations formation process a simple framework and new facts we propose a new approach to test the full information rational expectations hypothesis which can identify whether rejections of the null arise from irrationality or limited information this approach quantifies the economic significance of departures from the null by quantifying the underlying degree of information rigidity applying this approach to u s and international data of professional forecasters and other agents yields pervasive evidence consistent with models of imperfect information furthermore the proposed approach sheds new light on policies such as inflation targeting and those leading to the great moderation affecting expectations finally we document evidence of state dependence in the expectations formation process

an alternative to steady state comparisons in perfect foresight models abstract this note examines a technique for the computation of the welfare impact of a pertubation of the steady state in a typical perfect foresight model the major innovation is the ability to analyze non stationary perturbations

technology and competitiveness this paper reviews the literature on technology and competitiveness first the concept of the international competitiveness of a country and various theoretical approaches on the relationship between trade and growth are discussed then a number of empirical studies of the impact of technology as evidenced by r d patents etc on exports are examined the final section summarizes the evidence and considers the lessons for policy copyright 1996 by oxford university press

public budgetary rules and gdp growth an empirical study on oecd and twelve european countries we study the long term effects of budgetary rules on gdp growth rate and analyse the determinants of the short term gdp growth dynamics for both a sample of 19 oecd and a subsample of 12 european countries we show that in the long run improvements in the cyclically adjusted budget balance as well as increases in the tax burden have negative effects on gdp growth the highest effect of fiscal policy on gdp growth would be obtained if the structural deficits were used to increase the market size by reducing the tax burden in line with barro 1990 a deficit financed reduction of tax burden has a stronger effect for european than for oecd countries because in europe the government size with respect to market size is too large therefore if gdp growth is a dominant policy objective in europe specific actions should redress the 2012 treaty toward a reduction of the tax burden

scale congestion and growth this paper explores the relationship between aggregate and relative congestion returns to scale and economic growth aggregate congestion reduces the effective productivity of capital relative congestion reduces the effective productivity of labour both forms of congestion adversely affect the equilibrium growth rate although their relative effects depend upon aggre gate returns to scale the two forms of congestion have contrasting effects on the transitional dynamics relative congestion retards the rate of adjustment aggregate congestion accelerates it the externalities generated by congestion and non optimal expenditure can be fully cor rected both during the transition and in steady state by a time invariant income tax the role of public expenditure as an instrument of economic growth has been a major policy issue as governments throughout the world design stimulus packages as in japan and face difficult choices to meet the emu criteria in europe empirical research investigating the impact of public investment on the productivity of private capital and output was stimulated by aschauer 1989a b who found the effects to be strongly positive the nature of public investment is however diverse in general public goods vary extensively in terms of the nature of their services spanning the range between the polar cases of pure private and pure public goods but the treatment of public expenditures in formal growth models is limited barro 1990 and futagami et al 1993 treat government expenditure as a pure pub lic good and in so doing they fail to take account of the congestion typically associated with public goods however as barro and sala i martin 1992 have argued almost all public services are characterized by some degree of congestion so that the pure public good should be viewed as only a bench mark these considerations suggest that congestion is an important consider ation in assessing the effect of public expenditures on economic growth attempts to analyse the effects of congestion on economic growth have been limited in various dimensions drawing on the public goods literature edwards 1990 proposes a number of specifications of congestion two notions particularly relevant in a growth context are relative congestion and aggregate absolute congestion the former specifies the level of services derived by an individual from the provision of a public good in terms of the usage of his individual capital stock relative to the aggregate capital stock aggregate congestion sometimes called crowding indicates how aggregate usage of the service alone influences the services received by an individual 2 existing applications of congestion to growth theory introduce it into ak models see barro and sala i martin 1992 1995 glomm and ravikumar 1994 1997 and turnovsky 1996 1997 however the ak model features two limitations that restrict its flexibility to examine the relationship between congestion and growth first as solow 1994 pointed out sustained ongoing

fiscal policy elastic labor supply and endogenous growth abstract endogenizing labor supply leads to fundamental changes in the equilibrium structure of the ak growth model the balanced growth equilibrium can be described in terms of two tradeoff loci relating the equilibrium growth rate to the fraction of time devoted to leisure the implications of endogenous labor supply for fiscal policy are analyzed three issues are addressed first the effects of various distortionary tax changes and government expenditure changes on the equilibrium growth leisure employment tradeoff are analyzed second optimal fiscal policy is characterized finally the formal analysis is supplemented by numerical results focusing particularly on the quantitative welfare implications

on the analytics of the dynamic laffer curve in this paper we analyze government budget balance within a simple model of endogenous growth for the ak model simple analytical conditions for a tax cut to be self financing can be derived the critical variable is not the tax rate per se but the transfer adjusted tax rate we discuss some conceptual issues in dynamic revenue analysis and we explain why previous studies have arrived at seemingly contradictory results finally we perform an empirical study of the transfer adjusted tax rates of the oecd countries to see which country has the highest potential for fiscal improvements it turns out that only a few countries have any potential for such dynamic scoring

is infrastructure capital productive a dynamic heterogeneous approach this paper offers an empirical evaluation of the output contribution of infrastructure drawing from a large data set on infrastructure stocks covering 88 countries and spanning the years 1960 2000 and using a panel time series approach the paper estimates a long run aggregate production function relating gdp to human capital physical capital and a synthetic measure of infrastructure given by the first principal component of infrastructure endowments in transport power and telecommunications tests of the cointegration rank allowing it to vary across countries reveal a common rank with a single cointegrating vector which is taken to represent the long run production function estimation of its parameters is performed using the pooled mean group estimator which allows for unrestricted short run parameter heterogeneity across countries while imposing the testable restriction of long run parameter homogeneity the long run elasticity of output with respect to the synthetic infrastructure index ranges between 0 07 and 0 10 the estimates are highly significant both statistically and economically and robust to alternative dynamic specifications and infrastructure measures there is little evidence of long run parameter heterogeneity across countries whether heterogeneity is unconditional or conditional on their level of development population size or infrastructure endowments

anticipated environmental policy and transitional dynamics in an endogenous growth model this paper makes a new attempt toinvestigate how an anticipatedenvironmental policy governs the transitionaldynamics of an economy when pollutionexternality is taken into account themodeling strategy we use is an ak technologyendogenous growth framework with an endogenousleisure labor choice it is found that unlikeinelastic labor supply framework a rise inpublic abatement expenditure will stimulate thebalanced economic growth rate it is alsofound that public abatement technology plays animportant role in determining the transitionaladjustment of the economic growth rate inresponse to a pre announced environmentalpolicy

equilibrium dynamics in two sector models of endogenous growth abstract this paper considers two extensions of the uzawa lucas framework in our first extension physical capital is included as an input of the educational sector in our second extension leisure considerations are assumed to play a positive role in agents welfare the case with physical capital in the production of education features under standard conditions a unique steady state and thus the dynamics are qualitatively similar to those of the original uzawa lucas framework in our second model with leisure there could be a multiplicity of steady states with different rates of growth what determines here the chosen rate of growth is the initial relative amount of physical and human capital our results therefore illustrate that in a world without externalities there could coexist different long term growth rates

intertemporal budget policies and macroeconomic adjustment in a small open economy abstract this paper analyzes the role of nominal assets in ranking intertemporal budget policies in a growing open economy budget policies are ranked in terms of the public s intertemporal tax liability in our small open economy model the constraint for the valuation of private and public financial assets is in terms of the exogenous foreign price level we show that this limits under purchasing power parity the scope of the government to influence the real value of financial assets using fiscal and monetary policy instruments

short sale constraints information acquisition and asset prices abstract during financial crises financial market regulators often restrict short selling to support prices and curb volatility however evidence suggests that short selling bans during the turmoil in financial markets in 2007 2009 failed to achieve regulators goals we analyze a model of costly private information acquisition and asset pricing under short sale constraints to examine a possible cause of this failure we show that the constraints increase return volatility by adversely affecting the production of private information when investors are highly risk averse or are holding highly correlated risky assets the distortion in private information production arising from imposing short sale constraints leads to undervaluation implying that imposing short selling bans during economic crises not only fails to curb volatility but also may fail to support prices

the role of technology in market shares dynamics the paper presents the estimation of an empirical model of market share dynamics for five industrialized countries and 18 industries the emphasis is put on the importance of non price factors of competitiveness whereas most traditional explanations rest on the influence of relative prices among the former type of factor the role of variables reflecting technological advantage is privileged in particular the role of innovations has received considerable attention in the literature on international trade as well as the literature on endogenous growth in this spirit the paper introduces patent counts and investment as explanatory variables for the export market share the results show that non price variables have an important impact on the determinations of long run competitiveness

tax structure and growth in a model with human capital abstract the effect of the tax structure on the long run growth rate of income and consumption is analyzed where tax structure refers to the mix of taxes on physical and human capital which satisfy an exogenously given government budget constraint the factor used intensively in the consumption good sector relative to the capital goods sector as a whole is taxed more highly in a growth maximizing tax structure an endogenous labor supply the tax treatment of depreciation and the effect of replacing the income tax with a consumption tax are all considered

the equilibrium approach to fiscal policy this paper lays out a simple model for the purpose of bringing together the various strands of the analysis of fiscal policy in an optimizing competitive equilibrium model the discussion centers on the critic al assumptions lying behind the ricardian equivalence proposition th e role of the time profile and composition of public expenditure and the timing of distortional taxation copyright 1988 by ohio state university press

fiscal policy inflation and the accumulation of risky capital the effect of government policies on the level of investment and inflation has become a major concern of policy makers in a number of industrial countries proposals to raise the level of business investment have included overall tax cuts tax incentives to spur investment and a reduction in the level of government spending this paper presents a theoretical apparatus to explore the relationships between fiscal policy government debt inflation and capital accumulation it develops a one sector growth model embodying a stochastic production function and government fiscal policy atomistic agents in the economy choose consumption levels and allocate their wealth between risky capital and risky government debt to maximize expected discounted utility over an infinite horizon fiscal policy by affecting asset yields affects the composition of portfolios the price of government bonds and the accumulation of capital the model is used to answer three general questions 1 does the level of government expenditure affect the rate of capital accumulation and inflation in steady state 2 does the mode of government finance when the choice is between an income tax and deficit finance affect these magnitudes 3 what is the effect of uncertainty in the productivity of capital on growth the analysis relates to several areas of literature 1 the analysis of the relationship between capital accumulation and debt 2 the theory of the demand for government debt 3 considerations of the effect of income taxation on risk bearing and 4 the analysis of capital accumulation under uncertainty 1 the effects on output and the capital stock of the government s expenditure decision and its decision to finance its expenditure by taxation or debt issue are explored in two major bodies of economic theory the literature on the burden of the debt as developed by modigliani 1961 diamond 1965 and phelps and shell 1969 for example implies that policies which increase the value of outstanding government debt will tend to lower the level of the capital stock by displacing capital with public debt in private wealth the theory of money and growth as represented by tobin 1965 and sidrauski 1967b also implies that government debt displaces capital but specifically recognizes the role of capital gains on government debt

transitional dynamics in two sector models of endogenous growth the steady state and transitional dynamics of two sector models of endogenous growth are analyzed in this paper we describe necessary conditions for endogenous growth the conditions allow us to reduce the dynamics of the solution to a system with one state like and two control like variables we analyze the determinants of the long run growth rate we use the time elimination method to analyze the transitional dynamics of the models we find that there are transitions in real time if the point in time production possibility frontier is strictly concave which occurs for example if the two production functions are different or if there are decreasing point in time returns in any of the sectors we also show that if the models have a transition in real time the models are globally saddle path stable we find that the wealth or consumption smoothing effect tends to dominate the substitution or real wage effect so that the transition from relatively low levels of physical capital is carried over through high work effort rather than high savings we develop some empirical implications we show that the models predict conditional convergence in that in a cross section the growth rate is predicted to be negatively related to initial income but only after some measure of human capital is held constant thus the models are consistent with existing empirical cross country evidence authors

capital market integration and fiscal sustainability abstract by constructing a two country endogenous growth model with a debt financing government this paper studies the relationship between the sustainability of public finance and increases in inter regional factor mobility to this end it identifies the minimum tax rate that ensures fiscal sustainability against the backdrop of capital tax competition and studies whether competition for mobile capital lowers or improves fiscal sustainability the main findings are as follows i when countries are symmetric increasing capital flows promotes economic growth through the expansion of romer type knowledge spillovers resulting in increased fiscal sustainability in all countries and ii when a marked difference exists between countries tax competition caused by capital movements might lower fiscal sustainability in a country with abundant capital and large outstanding debt

supply side economics and endogenous growth abstract in a simple convex model of endogenous growth the expansionary effects of a deficit financed tax cut are often strong enough to allow the government debt to be paid off in the long run without the need for subsequent tax increases a permanent and substantial reduction in marginal rates of income taxation can provide for both vigorous real economic growth and long run government budget balance

spill over effects of supply side changes in a two country economy with capital accumulation abstract using a two country dynamic optimization model with capital accumulation we explore the effect of such supply side changes as a rise in productivity and a reduction in the corporate tax rate on the equilibrium path and the welfare of two countries the welfare effect consists of a tax distortion term and a wealth term those supply side changes in the creditor country increase its welfare but unambiguously decrease the debtor country s welfare as capital moves from the debtor country to the creditor country

uneven growth between interdependent economies an evolutionary view on technology gaps trade and growth preface part one theory and empirics of international growth rate differentials and technology gaps chapter 1 technology growth and welfare a historical perspective 1 1 the search for welfare and the role of technology 1 2 aim of the book 1 3 organisation of the rest of the book notes chapter 2 the literature on economic growth and technological change 2 1 a brief overview 2 2 the traditional literature on economic growth 2 3 new neoclassical growth models endogenous innovation 2 4 the role of technological change 2 5 explaining growth rate differentials notes chapter 3 an evolutionary theory of economic growth and technological change the basics 3 1 economic growth as an evolutionary process a macroeconomic interpretation 3 2 economic growth as an evolutionary process a microeconomic interpretation 3 3 towards an evolutionary theory notes chapter 4 technology and growth in an international perspective 1960 1990 an impressionistic approach 4 1 economic growth and structural change 4 2 technology 4 3 technology and growth catching up or falling behind a global issue 4 4 summary and conclusions appendix iv 1 postwar economic welfare and the selection of country samples appendix iv 2 the 3 digit isic sector classification revision 2 appendix iv 3 on measuring and graphing structural differences between countries appendix iv 4 some tests for the influence of multicollinearity on the regressions in section 4 2 notes part two technology spillovers between interdependent economies catching up or falling behind chapter 5 a model of catching up or falling behind 5 1 description of the model 5 2 solving the model 5 3 the outcomes of the model under varying parameter restrictions 5 4 conclusions of the model notes chapter 6 an empirical test of the model 6 1 testing procedure and data sources 6 2 result 6 3 interpreting the results 6 4 summary and some policy conclusions appendix vi l a description of the data appendix vi 2 the calculation of the n statistic notes part three technological change international trade and economic growth chapter 7 an evolutionary model of technological change specialisation and economic growth 7 1 a descriptive interpretation 7 2 the model 7 3 simulation results 7 4 summary and conclusions appendix vii 1 initial values of the simulation runs for the 3 country 2 sector case appendix vii 2 some mathematical details of the selection equation in discrete time notes chapter 8 an empirical view on the evolution of trade and technology 8 1 patents as indicators of innovation 8 2 summarising some known correlations 8 3 trade and technology a dynamic evolutionary framework 8 4 estimation of the replicator equation 8 5 some further tests on the robustness of the replicator estimates 8 6 explaining the results for the patent variables 8 7 summary and conclusions

growth versus welfare in a model of nonrival infrastructure abstract the paper constructs a model of endogenous growth where infrastructure acts as an accumulable stock generating a nonrival input service steady state growth paths are studied for market and command economies in the former a final good is produced privately and as in many developing economies infrastructure accumulated on noncompetitive basis by the state the command economy allocates resources by solving a grand optimization exercise the transitionally stable steady growth rate for the market economy dominates the command economy growth rate due to the joint presence of noncompetitive behaviour by the state and noninternalizable externalities

budget balance welfare and the growth rate dynamic scoring of the long run government budget this paper determines conditions under which a reduction in the role of government either through a tax cut alone or together with accompanying expenditure cuts will improve long run government fiscal balance for a ceteris paribus cut in the income tax rate to improve long run government balance the intertemporal elasticity of substitution must exceed unity a tax cut balanced by an expenditure cut is likely to improve the long run balance even if it does not improve the short run balance the relationship between improving the long run fiscal balance and economic welfare is also analyzed

infrastructure provision and macroeconomic performance this paper studies the differences between private and government provision of infrastructure capital utilization decisions and their differential role in determining market prices for capital goods under the two regimes of infrastructure provision serve as a critical transmission mechanism for fiscal policy a subsidy to private providers of infrastructure is preferable to direct government provision irrespective of how the subsidy or expenditure is financed the case for private provision is much stronger in economies characterized by high levels of congestion the choice between private and government provision also has a crucial effect on the design of optimal fiscal policy 2011 elsevier b v all rights reserved

fiscal policy long run growth and welfare in a stock flow model of public goods we introduce public capital and public services as inputs in an endogenous growth model we show that the growth rate depends on the apportionment of tax revenues between the accumulation of public capital and the provision of public services when public spending is financed by proportional income taxes the growth rate the level of public spending as a proportion of gdp the level of investment in public capital as a proportion of total public spending and the level of private investment as a proportion of total private spending all are lower in the equilibrium outcome than in the optimal outcome jel classification e62 o40 politique fiscale croissance a long terme et bien etre dans un modele stock flow de biens publics les auteurs introduisent du capital public et des services publics comme intrants dans un modele de croissance endogene on montre que le taux de croissance depend de l allocation des revenus de la fiscalite entre l accumulation de capital public et la fourniture de services publics quand les depenses publiques sont financees par un impot proportionnel sur le revenu le taux de croissance le niveau de depenses publiques en pourcentage du pib le niveau d investissement en capital public et le niveau d investissement prive en proportion de la depense totale privee sont tous moins eleves au niveau d equilibre que ce qui serait le resultat optimal

the intertemporal elasticity of substitution in consumption in the united states and the united kingdom as robert e hall 1988 notes the magnitude of the intertemporal elasticity of substitution in consumption is one of the central questions of macroeconomics do higher expected real interest rates lead to deferred consumption the authors extend hall s methodology and model and compare results for the united sta tes and the united kingdom in both cases they directly estimate the mo ving average process that temporal aggregation might induce in the random disturbances and take account of consumers who do not follow the lif e cycle permanent income model of consumption copyright 1992 by mit press

excludable and non excludable public inputs consequences for economic growth non excludable and excludable public inputs are introduced into an endogenous growth model we derive the equilibrium growth rate and design the optimal tax and user cost structure emphasizing the role of congestion and its consequences for the government s budget the latter comprises fee and tax revenues that are used to finance the public inputs although they may generate insufficient revenue to do so entirely we extend the model to allow for monopoly pricing of the user fee by the government most of the analysis is conducted for general production functions consistent with endogenous growth but the ces technology is also considered a vast literature has evolved emphasizing the role of public investment as a determinant of economic growth among the earliest contributions arrow and kurz 1970 is particularly significant while the seminal work of barro 1990 has been especially influential with respect to the contemporary endogenous growth literature stimulated by aschauer s 1989 findings pertaining to the high rate of return on public capital several authors have explored various aspects of the role of public capital in stimulating economic growth for example baxter and king 1993 and fisher and turnovsky 1998 examine the interaction between public and private capital in a ramsey type growth model while futagami et al 1993 perform a similar type of analysis in an endogenous growth context glomm and ravikumar 1997 analyse the growth effects of productive public spending in an overlapping generations setup extending the framework to include majority voting and alternative compositions of publicly provided goods and services they also indicate private alternatives to public provision but do not pursue this in detail cassou and lansing 1998 focus on the relationship between private and public capital showing how the evolution of the ratio between the two in the us economy since 1925 is broadly consistent with the predictions of a simple ramsey growth model they also show how the productivity slowdown in the us economy since the 1970s is more likely due to increasing tax rates than to non optimal public investment policy much of the literature including barro treats the public input as a pure public good freely available without restrictions or impediments to all agents in the economy but the public goods literature identifies many different characteristics that most public goods in fact exhibit notably the presence of rivalry and or excludability see e g cornes and sandler 1996 thus the treatment of a public

is public expenditure productive abstract this paper considers the relationship between aggregate productivity and stock and flow government spending variables the empirical results indicate that i the nonmilitary public capital stock is dramatically more important in determining productivity than is either the flow of nonmilitary or military spending ii military capital bears little relation to productivity and iii a core infrastructure of streets highways airports mass transit sewers water systems etc has most explanatory power for productivity the paper also suggests an important role for the net public capital stock in the productivity slowdown of the last fifteen years

the laffer curve revisited abstract laffer curves for the us the eu 14 and individual european countries are compared using a neoclassical growth model featuring constant frisch elasticity cfe preferences new tax rate data is provided the us can maximally increase tax revenues by 30 with labor taxes and 6 with capital taxes we obtain 8 and 1 for the eu 14 there 54 of a labor tax cut and 79 of a capital tax cut are self financing the consumption tax laffer curve does not peak endogenous growth and human capital accumulation affect the results quantitatively household heterogeneity may not be important while transition matters greatly

habit formation and intertemporal substitution in individual food consumption individual food consumption data are used to examine three issues first is food consumption linked intertemporally at the individual level second does the association between current and past consumption reflect habit or heterogeneity third what do the estimates imply about the intertemporal elasticity of substitution the authors find that habit matters that controlling for heterogeneity reduces estimated habit effects and that the product of the estimated intertemporal elasticity of substitution and the risk aversion parameter is less than one these results all lead to rejection of time separable specifications of intertemporal consumption behavior copyright 1996 by mit press

laffer strikes again dynamic scoring of capital taxes abstract we set up a neoclassical growth model extended by a corporate sector an investment and finance decision of firms and a set of taxes on capital income we provide analytical dynamic scoring of taxes on corporate income dividends capital gains other private capital income and depreciation allowances and identify the intricate ways through which capital taxation affects tax revenue in general equilibrium we then calibrate the model for the us and explore quantitatively the revenue effects from capital taxation we take adjustment dynamics after a tax change explicitly into account and compare with steady state effects we find among other results a self financing degree of corporate tax cuts of about 70 90 and a very flat laffer curve for all capital taxes as well as for tax depreciation allowances results are strongest for the tax on capital gains the model predicts for the us that total tax revenue increases by about 0 3 1 2 after abolishment of the tax

accumulation innovation and catching up an extended cumulative growth model this paper presents an extended model of cumulative growth in which the effects of innovation and catching up are considered innovation adds another source of cumulative growth to that of traditional models and allows a consideration of the importance of non price determinants of international competitiveness catching up is the major force leading to convergence in productivity owing to the effect of the diffusion of technology the model allows one to analyse whether cumulative forces may lead to stable growth and whether this solution generates convergence in productivity levels the structural model is tested for a set of oecd countries over the period 1965 94

growth and unemployment short run and long run tradeoffs abstract we consider the role of search unemployment and wage bargaining in determining the relationship between growth and unemployment while the long run tradeoffs between unemployment and growth are weak the short run tradeoffs are much stronger their comovement varies along the transitional path and depends upon the underlying structural change the consequences of the growth unemployment nexus for fiscal policy are addressed the analysis provides insights into the debate regarding the appropriate fiscal policy in light of the increased debt following the initial response to the recent financial crisis our analysis strongly supports an increase in government investment as the appropriate fiscal policy

reprint to infrastructure provision and macroeconomic performance abstract this paper studies the differences between private and government provision of infrastructure capital utilization decisions and their differential role in determining market prices for capital goods under the two regimes of infrastructure provision serve as a critical transmission mechanism for fiscal policy a subsidy to private providers of infrastructure is preferable to direct government provision irrespective of how the subsidy or expenditure is financed the case for private provision is much stronger in economies characterized by high levels of congestion the choice between private and government provision also has a crucial effect on the design of optimal fiscal policy

international competitiveness in post keynesian growth theory controversies and empirical evidence a fundamental starting point for post keynesian theory concerning growth in open economies is succinctly expressed in the following statement by kaldor t he main autonomous factor governing both the level and the rate of growth of effective demand of an industrial country is the external demand for its exports and the main factor governing the latter is international competitiveness which in turn depends on the level of its industrial cost relatively to other industrial exporters kaldor 1971 p 7 italics added moreover thanks to increasing returns in manufacturing export expansion and international competitiveness would interact so as to create vicious or virtuous circles of cumulative causation a few years later kaldor having found a positive correlation between the time changes of the main industrial countries relative manufacturing export shares and that of their relative unit costs a correlation that became known as the kaldor paradox dismissed his original cumulative causation theory and adopted a version close to harrod s foreign trade multiplier the purpose of this paper is to reaffirm the kaldorian cumulative causation theory in its original version by providing a firmer analytical basis and showing that contrary to the kaldor paradox time changes in export performance must be explained by levels rather than by changes in unit costs

growth outside the stable path lessons from the european reconstruction abstract this paper exploits a natural experiment the large destruction of capital in continental europe during world war ii to characterize the transitional dynamics of an economy that begins with a capital stock below its steady state level we use these regularities as a benchmark to discriminate among competing growth specifications a model that combines non separabilities in preferences with a technology that restricts the degree of substitutability between inputs outperforms the widely used ak and cobb douglas specifications with time separable preferences our results suggest that policy evaluations based in growth models that overlook non separabilities in preferences or impose strong restrictions on the technological structure might be grossly misleading

the transitional dynamics of fiscal policy long run capital accumulation and growth this paper analyzes the effects of fiscal policies in a non scale growing economy with public and private capital the equilibrium dynamics are characterized and we contrast the dynamic effects of government expenditure on investment and expenditure on consumption under four alternative modes of tax financing most of our attention focuses on the numerical simulations of a calibrated economy the results emphasize the lengthy transition periods which implies that policies have sizeable level effects leading to substantial welfare effects even though long run growth rates are unaffected the paper highlights the intertemporal dimensions of fiscal policy and the tradeoffs these involve for economic performance especially growth and welfare

optimal taxation of capital income in general equilibrium with infinite lives this paper analyzes the optimal tax on capital income in general equilibrium models of the second best agents have infinite lives and utility functions which are extensions from the koopmans form the population is heterogeneous the important property of the models is the equality between the social and the private discount rates in the long run i find that the optimal tax rate is zero in the long run for a special case of additively separable utility functions i then determine the tax rates along the dynamic path and conditions that are sufficient for the local stability of the steady state

tax evasion and optimal commodity taxation abstract this paper incorporates tax evasion into ramsey s optimal taxation problem it provides i a precise and intuitive characterization of the tradeoff between optimal tax rates and audit probabilities and ii a modified version of the ramsey equation it also proves that in the presence of tax evasion a the well known requirement of proportional reduction in compensated demands b the traditional result on the optimality of uniform taxation when income is exogenous and c the equivalence of wage and uniform commodity taxes are no longer valid

optimal tax debt and expenditure policies in a growing economy abstract this paper employs an endogenous growth model to analyze the role of a consumption tax in enhancing growth and welfare provided government expenditure impacts directly on the decisions of private agents two fiscal instruments are necessary to replicate the first best optimum the tradeoff between consumption and income taxes to achieve this outcome is discussed and shown to depend upon the degree of congestion associated with the public good and the level of government expenditure relative to its social optimum in general the analysis suggests a potentially important role for a consumption tax as part of an overall optimal fiscal package

optimal sticky prices under rational inattention this paper presents a model in which price setting firms decide what to pay attention to subject to a constraint on information flow when idiosyncratic conditions are more variable or more important than aggregate conditions firms pay more attention to idiosyncratic conditions than to aggregate conditions when we calibrate the model to match the large average absolute size of price changes observed in micro data prices react fast and by large amounts to idiosyncratic shocks but only slowly and by small amounts to nominal shocks nominal shocks have strong and persistent real effects we use the model to investigate how the optimal allocation of attention and the dynamics of prices depend on the firms environment jel e 3 e5 d8

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting

the growth effects of tax rates in the oecd this paper explores the merits of macro and micro based tax rate measures within an open economy fiscal policy and growth model using annual data for 15 oecd countries we find statistically small non robust long run growth effects of macro based average tax rates on capital income and consumption but some evidence for average labor income tax effects changes in micro marginal income tax rates at both the personal and corporate levels yield statistically robust gdp responses of modest size both domestic and foreign corporate taxes appear relevant in general tax effects on gdp operate largely via factor productivity rather than factor accumulation

dynamic analysis of an endogenous growth model with public capital this paper develops an endogenous growth model with productive public capital along with private capital in a spirit similar to that of r j barro 1990 since the authors model includes two stock variables it has transitional dynamics unlike most of the previous studies on endogenous growth including barro s where concerns are restricted to the steady state analysis first they show that the transitional path is unique and stable second the character of the transitional path is explored third the authors show that the optimal tax rate is smaller than the rate that maximizes the national growth rate with a log linear utility function copyright 1993 by the editors of the scandinavian journal of economics

tax evasion and the allocation of capital abstract the efficiency cost of capital misallocations between the corporate sector and the noncorporate sector is typically measured using statutory tax differences corporate source income tax compliance is high because of third party reporting however while noncorporate rental income tax compliance is low differential evasion thus exacerbates statutory differences and enlarges the efficiency cost to measure this effect we build a numerical general equilibrium model where households simultaneously choose portfolios of risky assets and fractions of income to report