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Growth and Welfare Effects of Fiscal Policy in an Endogenous Growth Model with Public Investment

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  • Alfred Greiner
  • Horst Hanusch

Abstract

In this paper we analyze growth and welfare effects of fiscal policy in an endogenous growth model along the balanced growth path. As to the model we assume that sustained per capita growth results from public investment. The government uses its tax revenue for investment in public capital, for investment subsidy and for transfer payments. We then analyze how the balanced growth rate reacts to variations in those policy variables. Further, we study welfare effects of varying the fiscal parameters and demonstrate that, in general, maximizing economic growth is not equivalent to maximizing welfare on the balanced growth path. Copyright Kluwer Academic Publishers 1998

Suggested Citation

  • Alfred Greiner & Horst Hanusch, 1998. "Growth and Welfare Effects of Fiscal Policy in an Endogenous Growth Model with Public Investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(3), pages 249-261, July.
    • Handle: RePEc:kap:itaxpf:v:5:y:1998:i:3:p:249-261
    DOI: 10.1023/A:1008673925024
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    References listed on IDEAS

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