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

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  • 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
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    Cited by:

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    4. 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.

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    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

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