The Conditions for a Balanced Growth in a Model with Public Finance: an Analytic Solution

Carboni, Oliviero and Russu, Paolo (2011): The Conditions for a Balanced Growth in a Model with Public Finance: an Analytic Solution.

Abstract

This paper studies the equilibrium dynamics of a growth model with public finance where two different allocations of public resources are considered. The model simulta- neously determines the optimal shares of consumption, capital accumulation, taxes and composition of the two different public expenditures which maximize a representative household’s lifetime utilities for a centralized economy. The analysis supplies a closed form solution. Moreover, with one restriction on the parameters ( = ) we fully de- termine the solutions path for all variables of the model and determine the conditions for a balanced growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: growth models; fiscal policy; public spending composition
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H50 - General; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H20 - General; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General

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