IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/32961.html
   My bibliography  Save this paper

Optimal Financing of Government Purchases

Author

Listed:
  • Andrew B. Abel
  • Stavros Panageas

Abstract

We characterize a planner's optimal allocation of consumption and capital in an overlapping generations model with exogenous government purchases, privately-observed idiosyncratic shocks to the depreciation rate of capital, and a proportional cost of reversing investment to transform used capital to consumption. We show how a package of various taxes and government bonds can finance government purchases and support the same balanced growth path as in the planner's optimum. The optimal tax rate on capital income implements the planner's optimal (but incomplete) sharing of idiosyncratic depreciation risks, while respecting the private nature of these risks.

Suggested Citation

  • Andrew B. Abel & Stavros Panageas, 2024. "Optimal Financing of Government Purchases," NBER Working Papers 32961, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32961
    Note: AP EFG PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w32961.pdf
    Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H6 - Public Economics - - National Budget, Deficit, and Debt

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:nbr:nberwo:32961. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    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.