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The Conditions for a Balanced Growth in a Model with Public Finance: an Analytic Solution

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  • Carboni, Oliviero
  • Russu, Paolo

Abstract

This paper studies the equilibrium dynamics of a growth model with public finance where two different allocations of public resources are considered. The model simulta- neously determines the optimal shares of consumption, capital accumulation, taxes and composition of the two different public expenditures which maximize a representative household’s lifetime utilities for a centralized economy. The analysis supplies a closed form solution. Moreover, with one restriction on the parameters ( = ) we fully de- termine the solutions path for all variables of the model and determine the conditions for a balanced growth.

Suggested Citation

  • Carboni, Oliviero & Russu, Paolo, 2011. "The Conditions for a Balanced Growth in a Model with Public Finance: an Analytic Solution," MPRA Paper 36600, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:36600
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    References listed on IDEAS

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    More about this item

    Keywords

    growth models; fiscal policy; public spending composition;
    All these keywords.

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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