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Size and composition of public spending in a Neoclassical growth model

Carboni, Oliviero Antonio and Medda, Giuseppe (2011) Size and composition of public spending in a Neoclassical growth model. Metroeconomica, Vol. 62 (1), p. 150-170. eISSN 1467-999X. Article.

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DOI: 10.1111/j.1467-999X.2010.04093.x

Abstract

This paper analyses the effect of public expenditures in a modified Solow model of capital accumulation with optimizing agents. The model identifies optimal government size and composition of public expenditures which maximize the rate of growth in the dynamics to the steady state and the long-run level of per capita income. Different allocations of public resources lead to different growth rates in the transitional dynamics depending on their elasticities. However effects from fiscal policy are only temporary. Finally we argue that neglecting the non-linear nature of the relationship between government spending and growth may lead empirical studies to biased results.

Item Type:Article
ID Code:5433
Status:Published
Refereed:Yes
Uncontrolled Keywords:Public expenditures, Solow model, capital accumulation, optimizing agents
Subjects:Area 13 - Scienze economiche e statistiche > SECS-P/01 Economia politica
Divisions:001 Università di Sassari > 01 Dipartimenti > Economia, impresa, regolamentazione
Publisher:Wiley / Blackwell
eISSN:1467-999X
Copyright Holders:© 2010 Blackwell Publishing Ltd.
Deposited On:07 Feb 2011 09:15

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