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Fiscal Settings and the Steady State Growth Path

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  • K. M. HAWTREY

Abstract

This paper outlines how deficit‐neutral fiscal settings, via their impact on the growth/distribution equation, can play a positive role in minimizing deviant macroeconomic performance. The conventional Solow‐Swan model of economic growth assigns no role to the standard instruments of fiscal policy in influencing the equilibrium growth path. In the model presented here, government fiscal policy–in the form of tax and transfer rates–is shown to have real effects on the long‐term growth path of the unionized macroeconomy, even when the budget is permanently balanced and policy is fully announced.

Suggested Citation

  • K. M. Hawtrey, 1995. "Fiscal Settings and the Steady State Growth Path," The Economic Record, The Economic Society of Australia, vol. 71(4), pages 354-366, December.
    • Handle: RePEc:bla:ecorec:v:71:y:1995:i:4:p:354-366
    DOI: 10.1111/j.1475-4932.1995.tb02680.x
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    1. repec:bla:scandj:v:87:y:1985:i:2:p:270-92 is not listed on IDEAS
    2. K. Sato, 1966. "The Neoclassical Theorem and Distribution of Income and Wealth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 33(4), pages 331-335.
    3. repec:bla:scandj:v:87:y:1985:i:2:p:335-51 is not listed on IDEAS
    4. Luigi L. Pasinetti, 1962. "Rate of Profit and Income Distribution in Relation to the Rate of Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 29(4), pages 267-279.
    5. K. Hamada, 1967. "On the Optimal Transfer and Income Distribution in a Growing Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 34(3), pages 295-299.
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