IDEAS home Printed from https://ideas.repec.org/a/sek/jijoes/v5y2016i4p51-72.html
   My bibliography  Save this article

Public Debt and Economic Growth in Uzawa?s Two-Sector Model with Public Goods

Author

Listed:
  • wei-bin zhang

    (Ritsumeikan Asia Pacific University)

Abstract

This paper studies public debt dynamics in a neoclassical growth model. The economy consists of one capital, one service and one public sector. The model is a synthesis of Solow?s growth, Uzawa?s two-sector, and Diamond?s debt models. The public sector supplies services which directly affect productivity of the two sectors and welfare of the population. The government finances public expenditure by taxing the outputs, consumption, wealth income, and wage households. The study focuses on the effects of changes in government?s expenditure, the public sector?s productivity, and different taxes on the dynamics of public debt and economic growth. Comparative dynamic analysis examines the effects of changes in preference and polices.

Suggested Citation

  • wei-bin zhang, 2016. "Public Debt and Economic Growth in Uzawa?s Two-Sector Model with Public Goods," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 5(4), pages 51-72, December.
  • Handle: RePEc:sek:jijoes:v:5:y:2016:i:4:p:51-72
    as

    Download full text from publisher

    File URL: https://iises.net/international-journal-of-economic-sciences/publication-detail-953
    Download Restriction: no

    File URL: https://iises.net/international-journal-of-economic-sciences/publication-detail-953?download=4
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. H. Uzawa, 1971. "On a Two-Sector Model of Economic Growth," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 3, pages 19-26, Palgrave Macmillan.
    3. Barro, Robert J & Mankiw, N Gregory & Sala-i-Martin, Xavier, 1995. "Capital Mobility in Neoclassical Models of Growth," American Economic Review, American Economic Association, vol. 85(1), pages 103-115, March.
    4. Pedro Aspe Armella & Rudiger Dornbusch & Maurice Obstfeld, 1983. "Financial Policies and the World Capital Market: The Problem of Latin American Countries," NBER Books, National Bureau of Economic Research, Inc, number arme83-1.
    5. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    6. Turnovsky, Stephen J, 2004. "The Transitional Dynamics of Fiscal Policy: Long-Run Capital Accumulation and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(5), pages 883-910, October.
    7. Philippe Michel & Leopold Von Thadden & Jean‐Pierre Vidal, 2010. "Debt Stabilizing Fiscal Rules," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(5), pages 923-941, October.
    8. Wijkander, Hans, 1984. "Provision of public goods in congested cities," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 127-141, November.
    9. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    10. Guo, Jang-Ting & Harrison, Sharon G., 2004. "Balanced-budget rules and macroeconomic (in)stability," Journal of Economic Theory, Elsevier, vol. 119(2), pages 357-363, December.
    11. Turnovsky, Stephen J & Sen, Partha, 1991. "Fiscal Policy, Capital Accumulation, and Debt in an Open Economy," Oxford Economic Papers, Oxford University Press, vol. 43(1), pages 1-24, January.
    12. Schmitt-Grohe, Stephanie & Uribe, Martin, 1997. "Balanced-Budget Rules, Distortionary Taxes, and Aggregate Instability," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 976-1000, October.
    13. Judd, Kenneth L, 1987. "A Dynamic Theory of Factor Taxation," American Economic Review, American Economic Association, vol. 77(2), pages 42-48, May.
    14. Daniel Cohen & Jeffrey Sachs, 1991. "Growth and External Debt Under Risk of Debt Repudiation," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 437-472, National Bureau of Economic Research, Inc.
    15. Farmer, Roger E. A., 1986. "Deficits and cycles," Journal of Economic Theory, Elsevier, vol. 40(1), pages 77-88, October.
    16. Hochman, Oded, 1981. "Land rents, optimal taxation and local fiscal independence in an economy with local public goods," Journal of Public Economics, Elsevier, vol. 15(1), pages 59-85, February.
    17. Shuanglin Lin, 2000. "Government Debt and Economic Growth in an Overlapping Generations Model," Southern Economic Journal, John Wiley & Sons, vol. 66(3), pages 754-763, January.
    18. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521001151, October.
    19. Mankiw, N. Gregory & Weinzierl, Matthew, 2006. "Dynamic scoring: A back-of-the-envelope guide," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1415-1433, September.
    20. Turnovsky, Stephen J., 1990. "The effects of taxes and dividend policy on capital accumulation and macroeconomic behavior," Journal of Economic Dynamics and Control, Elsevier, vol. 14(3-4), pages 491-521, October.
    21. Buiter, Willem H, 1988. "Death, Birth, Productivity Growth and Debt Neutrality," Economic Journal, Royal Economic Society, vol. 98(391), pages 279-293, June.
    22. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    23. Chalk, Nigel A., 2000. "The sustainability of bond-financed deficits: An overlapping generations approach," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 293-328, April.
    24. Turnovsky, Stephen J., 2000. "Fiscal policy, elastic labor supply, and endogenous growth," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 185-210, February.
    25. Chryssi Giannitsarou, 2007. "Balanced Budget Rules and Aggregate Instability: The Role of Consumption Taxes," Economic Journal, Royal Economic Society, vol. 117(523), pages 1423-1435, October.
    26. Wei-Bin Zhang, 2009. "Agglomeration and Returns to Scale with Capital and Public Goods in a Multi-Regional Economy," International Economic Journal, Taylor & Francis Journals, vol. 23(1), pages 81-109.
    27. Wei‐Bin Zhang, 2011. "Economic growth with space and fiscal policies with housing and public goods," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 38(4), pages 452-482, September.
    28. Hyun Park, 2009. "Ramsey fiscal policy and endogenous growth," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 39(3), pages 377-398, June.
    29. Olivier Jean Blanchard, 1983. "Debt and the Current Account Deficit in Brazil," NBER Chapters, in: Financial Policies and the World Capital Market: The Problem of Latin American Countries, pages 187-198, National Bureau of Economic Research, Inc.
    30. Semmler, Willi & Sieveking, Malte, 2000. "Critical debt and debt dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 1121-1144, June.
    31. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, April.
    32. Wei-Bin Zhang, 2008. "International Trade Theory," Springer Books, Springer, number 978-3-540-78265-0, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wei-Bin Zhang, 2018. "Economic Growth and Health Dynamics with Government Subsidies for Healthcare," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2018(3), pages 3-23.
    2. Wei-Bin Zhang, 2018. "National Debt and Economic Growth with Externalities and Congestions," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 2, pages 175-191, June.
    3. Wei-Bin Zhang, 2017. "Governments’ Debts And Public Goods In A Multi-Country. Growth Model With Tradable And Non-Tradable Goods," Journal of Smart Economic Growth, , vol. 2(2), pages 1-34, May.
    4. Wei-Bin Zhang, 2020. "Optimal Taxation in the Solow-Uzawa Growth Model with Public Goods," Journal of Social and Development Sciences, AMH International, vol. 10(3), pages 1-11.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wei-Bin Zhang, 2018. "National Debt and Economic Growth with Externalities and Congestions," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 2, pages 175-191, June.
    2. Wei-Bin Zhang, 2017. "Governments’ Debts And Public Goods In A Multi-Country. Growth Model With Tradable And Non-Tradable Goods," Journal of Smart Economic Growth, , vol. 2(2), pages 1-34, May.
    3. Philippe Michel & Leopold Von Thadden & Jean‐Pierre Vidal, 2010. "Debt Stabilizing Fiscal Rules," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(5), pages 923-941, October.
    4. Philip L. Brock, 2009. "Collateral Constraints and Macroeconomic Adjustment in an Open Economy," Working Papers UWEC-2009-03, University of Washington, Department of Economics.
    5. Semmler, Willi & Wohrmann, Peter, 2004. "Credit risk and sustainable debt: a model and estimations of why the Euro is stable in the long-run," Economic Modelling, Elsevier, vol. 21(6), pages 1145-1160, December.
    6. Diego Martínez López, 2002. "Crecimiento y capital público desde una perspectiva regional: Una extensión del modelo de Barro," Revista de Estudios Regionales, Universidades Públicas de Andalucía, vol. 3, pages 75-92.
    7. Turnovsky, S., 2000. "Growth in an Open Economy: some Recent Developments," Papers 5, Warwick - Development Economics Research Centre.
    8. Xavier Sala-i-Martin, 1990. "Lecture Notes on Economic Growth(I): Introduction to the Literature and Neoclassical Models," NBER Working Papers 3563, National Bureau of Economic Research, Inc.
    9. Martin Zagler & Georg Dürnecker, 2003. "Fiscal Policy and Economic Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 397-418, July.
    10. Robinson, James A. & Srinivasan, T.N., 1993. "Long-term consequences of population growth: Technological change, natural resources, and the environment," Handbook of Population and Family Economics, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 21, pages 1175-1298, Elsevier.
    11. Semmler, Willi & Sieveking, Malte, 2000. "Critical debt and debt dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 1121-1144, June.
    12. Long, Xin & Pelloni, Alessandra, 2017. "Factor income taxation in a horizontal innovation model," Journal of Public Economics, Elsevier, vol. 154(C), pages 137-159.
    13. Shaheen Naseer, 2019. "Public Spending, Quality of Bureaucracy and Economic Growth: A Theoretical Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 58(2), pages 203-221.
    14. Minea, Alexandru, 2008. "The Role of Public Spending in the Growth Theory Evolution," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 5(2), pages 99-120, June.
    15. Willi Semmler, 2011. "Asset Prices, Booms and Recessions," Springer Books, Springer, number 978-3-642-20680-1, January.
    16. Zhang, Wei-Bin, 2013. "The impact of transport, land and fiscal policy on housing and economic geography in a small, open growth model," The Journal of Transport and Land Use, Center for Transportation Studies, University of Minnesota, vol. 6(1), pages 89-100.
    17. Elmendorf, Douglas W. & Gregory Mankiw, N., 1999. "Government debt," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 25, pages 1615-1669, Elsevier.
    18. Sanz Labrador, Ismael & Sanz-Sanz, José Félix, 2013. "Política fiscal y crecimiento económico: consideraciones microeconómicas y relaciones macroeconómicas," Macroeconomía del Desarrollo 5367, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    19. Long Xin & Pelloni Alessandra, 2011. "Welfare improving taxation on savings in a growth model," wp.comunite 0091, Department of Communication, University of Teramo.
    20. Kaminsky, Graciela L. & Pereira, Alfredo, 1996. "The debt crisis: lessons of the 1980s for the 1990s," Journal of Development Economics, Elsevier, vol. 50(1), pages 1-24, June.

    More about this item

    Keywords

    public debt; tax rates; public good; growth;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sek:jijoes:v:5:y:2016:i:4:p:51-72. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klara Cermakova (email available below). General contact details of provider: https://ijoes.iises.net/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.