Dynamic Fiscal Policies and Endogenous Growth |
Hyun Park, Apostolis Philippopoulos, |
Kyung-Hee University Athens University of Economics and Business |
Copyright ©2005 The Journal of Economic Integration |
ABSTRACT |
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This paper studies the dynamic properties of an endogenous growth model in which government consumption and production services are financed by capital taxes. I generalize the existence and its stability property of commitment Ramsey equilibria when government spending is productive and taxation is distortionary. I then establish a sufficient condition for uniqueness of the (positive) balanced growth path and determinacy of transitional dynamics. The same sufficient condition ensures growth convergence in Barro-type endogenous fiscal policies. This modeling approach can be used by a large class of endogenous growth models which allow for market imperfections and optimal policies. In particular, a few implications for main results are discussed on economic integration. JEL Classifications: D90, H21, O38 |
Keywords:
Optimal tax policy | Transitional dynamics | Determinacy | Growth convergence
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REFERENCE |
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Devereux M. and J-F. Wen [1998]: "Political instability, capital taxation and growth," European Economic Review 42, 1635-1651. |
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Futagami K., Y. Morita and A. Shibata [1993]: "Dynamic analysis of an endogenous growth model with public capital," Scandinavian Journal of Economics 95, 607-625. |
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