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A Neoclassical growth model with public spending

Carboni, Oliviero Antonio and Medda, Giuseppe (2010) A Neoclassical growth model with public spending. Cagliari, CRENoS. p. 16 (Working Papers CRENoS, 2010, 33). Working Paper.

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Abstract

This paper analyses the effect of public expenditures in the context of a modified Solow model of capital accumulation with optimising agents. The model identifies optimal government size and optimal composition of public expenditures which maximize the rate of growth in the dynamics to the steady state and maximize 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 elasticity. However effects from fiscal policy are only temporary and disappear in the steady state. Finally we argue that neglecting the nonlinear nature of the relationship between government spending and growth may lead empirical studies to biased results.

Item Type:Working Paper
ID Code:5595
Status:Published
Uncontrolled Keywords:Neoclassical and augmented growth models, fiscal policy, public spending composition
Subjects:Area 13 - Scienze economiche e statistiche > SECS-P/01 Economia politica
Divisions:002 Altri enti e centri di ricerca del Nord Sardegna > CRENoS-Centro Ricerche Economiche Nord Sud, Università di Cagliari e Università di Sassari
001 Università di Sassari > 01 Dipartimenti > Economia, impresa, regolamentazione
Publisher:CRENoS
Publisher Policy:Depositato per gentile concessione del CRENoS
Deposited On:21 Feb 2011 10:49

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