Public capital,deficit financing,and economic growth in a stochastic economy

This paper examines the relationship among deficit-financing fiscal policy, risk and economic growth in a stochastic endogenous growth model with private and public capital. We show that there are positive balanced-growth rate and a debt-to-GDP ratio that depend on deep parameters such as the income tax rate and the standard deviation of the growth rate of private and public capital. Investment and fiscal shocks influence the mean and variance of the growth rate and the debt dependency rate through portfolio changes and capital accumulation. In particular, an increase in the risk of private investment destabilizes the economy and reduces the mean growth rate if the portfolio change is drastic, and this increase in risk increases the debt-to-GDP ratio. In contrast, an increase in the income tax rate stabilizes the economy, increases the mean growth rate, and has a positive or negative effect on the debt-to-GDP ratio according to the ratio of public to private capital if the income tax rate is sufficiently small.     

财政政策的供给效应与经济发展

本文分析了发展中国家公共投资对私人资本积累的动态响应。针对公共资本的拥挤性特征 ,同时考虑财政投资可能引起的风险。在不考虑公共投资风险的分权经济中 ,由于公共资本和私人资本都处于短缺状态 ,企业争夺拥挤性公共资本而扩张私人资本的投资行为虽然使经济超常增长 ,但是存在过度投资和过度拥挤。在集中优化模型中 ,如果考虑到公共投资的风险 ,政府通过税收方式弥补公共投资风险 ,同时将企业投资产生的拥挤效应内部化 ,就能消除企业的过度投资和过度拥挤现象 ,使经济保持合理持续的增长。对中国这样的发展中国家 ,需要重视财政的供给效应 ,在经济起飞初期保证一定数量的政府资本性支出是必要的 ,但随着经济的不断发展和政府资本性支出累积的风险增加 ,财政转型十分必要。     

财政政策、货币政策与国外经济援助

本文通过把国外经济援助分成直接对私人的经济援助和直接对政府的经济援助来讨论这两类经济援助对政府财政政策和货币政策的影响。我们发现对私人的经济援助的增加可以使得私人消费水平和政府公共消费水平增加 ,但是它也导致政府收入税税率和通货膨胀率的提高 ;另一方面 ,对政府的经济援助增加可以使得均衡时的私人资本存量、私人消费水平和政府公共消费水平增加 ,同时可以使得均衡时的收入税税率和通货膨胀率下降。     

Public Expenditure,Environment, and Economic Growth

This paper attempts to develop a model of endogenous growth with special consideration to the role of productive public expenditure in the presence of congestion effect of private capital and environmental pollution. We analyze the properties of the optimal fiscal policy in the steady‐state equilibrium when the level of production of the final good is the source of emission. Government allocates its income tax revenue between pollution abatement expenditure and productive public expenditure. In the steady‐state equilibrium, optimum ratio of productive public expenditure to national income is less than the competitive output share of the public input; and this ratio varies inversely with the magnitude of the emission‐output coefficient. The steady‐state equilibrium appears to be a saddle point; and the market economy growth rate is not necessarily less than the socially efficient growth rate in the steady‐state equilibrium.     

Government size,composition of public spending and economic growth in Brazil

The performance of the fiscal policy is largely affected by the relationship between government size, composition of public spending and economic growth. We use a theoretical framework to find optimal relations among these variables and confront them with a panel data for the Brazilian states. Private capital and government spending are substitute inputs in production as the Brazilian states require provision of public spending to fill gaps in the underdeveloped private sector. Public investment and current government expenditures are combined in fixed ratios in the overall government spending due to strong rigidity of the public budget. The optimal share of public investment is considerably lower than current expenditures, as occurs in developing countries characterized by low economic dynamism. Finally, the average tax burden from the data is below the estimated optimal level, meaning that there is space for increasing tax rate without harming economic growth for some Brazilian states.     

Fiscal Policy and Equitable Growth

This paper continues the study of optimal fiscal policy in a growing economy by exploring a case in which the government simultaneously provides three main categories of expenditures with distortionary tax finance: public production services, public consumption services, and state-contingent redistributive transfers. The paper shows that in a general-equilibrium model with given exogenous fiscal policy, a nonmonotonic relation exists between the suboptimal long-run growth rate in a competitive economy and distortionary tax rates. When fiscal policy is endogenously chosen at a social optimum, the relation between the rate of growth and tax rates is always negative. These two properties suggest that an alternative set of government policy instruments affects the response of private sector investment to fiscal policy. Moreover, the different properties of exogenous and endogenous fiscal policy theoretically account for the difference in the relation between economic growth and fiscal policy in empirical studies.     

Endogenous growth, welfare and budgetary regimes

Within an optimizing endogenous growth model with productive public capital and government debt, we derive and characterize on the balanced growth path a set of welfare-maximizing fiscal rules under different budgetary regimes. It is shown that optimal fiscal policy depends on the specific budgetary stance considered.     

Optimal fiscal policy, uncertainty, and growth

This paper analyzes the macroeconomic effects of fiscal policy in a stochastic endogenous growth model. Due to externalities in human capital accumulation, the market allocation is inefficient, thereby justifying government intervention. The uncertainty stemming from technological disturbances affects the growth rate, which can be explained by precautionary motives of risk averse agents. Fiscal policy means consist of a consumption tax, investment subsidies, and bonds. We obtain counter-acting growth effects of investment subsidies, which are differentiated with respect to deterministic and stochastic capital income components. The policy implications from the deterministic model are substantially extended in the stochastic context. A general rule for a welfare maximizing policy is derived, which is represented by a continuum of alternative tax-transfer-schemes. We discuss three benchmark cases, which crucially differ with respect to their implications regarding the size of the government expenditure share.     

Are short‐term effects of pollution important for growth and optimal fiscal policy?

We study optimal fiscal policy in a stock‐flow model of the environment within an endogenous growth framework, where some pollutants have a lasting impact on environmental quality which is restored through abatement expenditure, while others dissipate and hence, have a short‐term effect on the environment. All pollutants, however, affect the productivity of a public good negatively. Given that short‐term pollution, although it dissipates, is irreversible in this sense, a government cannot ignore its negative effects since this type of pollution lowers the productivity of all inputs. We find that a larger negative effect of short‐term pollutants as well as a higher congestion effect of private capital leads to corrective fiscal policies with higher optimal income tax and abatement expenditure rates, which have favorable growth consequences. Interestingly, we find that the rate of short‐term pollution does not affect optimal fiscal policy while that of the long‐term pollution does.     

Fiscal Policy, Congestion, and Endogenous Growth

We devise an endogenous growth model with private and public physical capital, and human capital, which allows for relative and absolute congestion. According to empirical evidence, long-run growth is invariant to fiscal policy. Despite its complexity, the dynamics of the market economy and the centralized economy are analyzed in detail. We show that an increase in absolute congestion reduces the long-run growth rate of output. In contrast, relative congestion does not affect long-run growth. In the absence of congestion, it is optimal to use lump-sum taxation, and with congestion it is optimal to also tax income.     

Human capital investment and debt constraints

When young individuals face binding debt constraints, their human capital investments will be insufficiently financed by private creditors. If generations overlap, then a well-designed fiscal policy may be able to improve human capital investments by replacing missing capital markets with an intergenerational transfer scheme. The optimal (balanced budget) fiscal policy in this context entails the joint provision of an education subsidy for the young and a pension program for the old, financed with a tax on those in their peak earning years. We demonstrate, however, that the desirability of such a cradle-to-grave policy depends crucially on the assumption of an exogenous debt constraint. If debt constraints arise endogenously for reasons of limited commitment, then the optimal (balanced budget) fiscal policy looks radically different. Furthermore, we find that cradle-to-grave type policy interventions may actually lead to lower levels of human capital investment as altered default incentives induce private creditors to contract the supply of student loans by an amount greater than the subsidy. In some cases, the constrained-optimal policy entails zero intervention. These results highlight the importance of taking seriously the reasons for why debt constraints exist.     

The general equilibrium effects of fiscal policy: Estimates for the Euro area

This paper describes a dynamic stochastic general equilibrium model featuring a fraction of non-Ricardian agents in order to estimate the effects of fiscal policy in the Euro area. The model takes into account distortionary taxation on labor and capital income and on consumption, while expenditures are broken down into purchases of goods and services, compensation of public employees and transfers to households. A newly computed quarterly data set of fiscal variables is used. Our results point to the prevalence of mild Keynesian effects of public expenditures. In particular, although innovations in fiscal policy variables tend to be rather persistent, government purchases of goods and services and compensations for public employees have small and short-lived expansionary effects on private consumption, while innovations in transfers to households show a slightly more sizeable and lasting effect. The effects are more significant on the revenue side: decreases in labor income and consumption tax rates have sizeable effects on consumption and output, while a reduction in capital income tax favors investment and output in the medium run. Finally our estimates suggest that fiscal policy variables contribute little to the cyclical variability of the main macro variables.     

Public capital formation and labor productivity growth in Chile

Following the lead of the endogenous growth literature, this article analyzes the impact on labor productivity growth of public and private investment spending in Chile. Using cointegration analysis, the results of the dynamic labor productivity function for the 1960–95 period show that (lagged) public and private investment spending, as well as the rate of growth in exports, has a positive and highly significant effect on the rate of labor productivity growth. The estimates also indicate that increases in government consumption spending have a negative effect on the rate of labor productivity growth, thus suggesting that the composition of government spending may also play an important role in determining the rate of labor productivity growth. The findings call into question the politically expedient policy in many Latin American countries of disproportionately reducing public capital expenditures to meet targeted reductions in the fiscal deficit as a proportion of GDP.     

公共资本投资、内生经济增长与合理政府债务规模*

本文基于一个具有内生增长机制的三部门世代交叠模型,讨论了政府举债为公共投资进行融资时经济的长期均衡;同时,通过数值模拟方法考察了我国的均衡政府债务规模及其影响因素。结果表明：在特定条件下,经济系统存在一个正的均衡政府债务-产出比重,该债务比重水平明显受到公共投资—产出比重、公共投资的债务融资比重、民间资本产出弹性等参数的影响。但是,均衡政府债务比重并不是无限上升的,当上述参数超过特定临界值时,经济系统无法达到均衡,政府债务-产出之比将持续上升,财政将不可持续。另外,当民间资本产出弹性较低时,较高的均衡政府债务比重可能导致经济运行动态无效率。数值模拟结果还显示,基于不同的假设情形,我国的均衡政府债务-产出比重均在不同程度上高于当前实际的政府债务规模,这为我国在未来期间实施扩张性财政政策提供了有利的依据。     

Macroeconomic impacts of fiscal policy shocks in the UK: A DSGE analysis

This paper develops and estimates a new-Keynesian dynamic stochastic general equilibrium (DSGE) model for the analysis of fiscal policy in the UK. We find that government consumption and investment yield the highest GDP multipliers in the short-run, whereas capital income tax and public investment have dominating effect on GDP in the long-run. When nominal interest rate is at the zero lower bound, consumption taxes and public consumption and investment are found to be the most effective fiscal instruments throughout the analysed horizon, and capital and labour income taxes are established to be the least effective. The paper also shows that the effectiveness of fiscal policy decreases in a small open-economy scenario and that nominal rigidities improve effectiveness of public spending and consumption taxes, whereas decrease that of income taxes.     

Optimal taxation and discount rate for public investment in a growth setting

This paper studies the optimal policy of a government which maximizes intertemporal social welfare using such instruments as taxes on interest income and wages, and debt in conjunction with public investment. In doing so, it has to face a decentralized economy where in each generation individuals and firms are free to maximize their own objectives subject to their own private constraints. The welfare function is a sum of discounted generational utilities and its maximization is handled by using dynamic programming. From the first order conditions so derived, it appears that an optimal policy of taxation and public capital accumulation is that which sets the tax rates according to Ramsey's optimal taxation structure and which equates the rate of return on public investment to the rate of social time preference.     

Political economy of taxation,debt ceilings,and growth

This study presents voting on policies, including labor and capital income taxes and public debt, in an overlapping-generations model with physical and human capital accumulation, and analyzes the effects of a debt ceiling on a government's policy formation and its impact on growth and welfare. The results show that the debt ceiling induces the government to shift the tax burdens from the older to younger generations, but stimulates physical capital accumulation and may increase public education expenditure, resulting in a higher growth rate. Alternatively, the debt ceiling is measured from the viewpoint of a benevolent planner and lowering the debt ceiling (i.e., tightening fiscal discipline) makes it possible for the government to approach the planner's allocation in an aging society.     

财政支出结构与经济增长

通过构建理论模型和经验模型,我们可以得出以下结论:(1)财政支出总水平与经济增长负相关,财政生产性支出与经济增长正相关。(2)财政人力资本投资比物质资本投资更能提高经济增长率。(3)用于科学研究的支出所带来的经济增长远远高于物质资本投资和人力资本投资所带来的经济增长。这些结论对政府今后调整财政支出政策,优化财政支出结构,确定财政支出重点,具有重要的政策含义。     

Indeterminate Balanced Growth under Habit Persistence and Fiscal Policies

This paper studies a dynamic general equilibrium model with habit persistence in preferences and fiscal policies of taxation and expenditures. Preference takes a subtractive form of habits (the marginal rate of substitution between the agent's own consumption and habit stocks is constant), and technology is linear in aggregate capital (the economy grows without a limit in the long run). We find a continuum of competitive equilibrium paths in conjunction with a unique balanced growth path in the growing economy, in which habits represent both envy/jealousy and altruism/admiration. In addition, in the social optimum under second-best fiscal policies, we show the existence of indeterminacy in transitional allocations along with a unique balanced growth path. Thus, we find that the introduction of habits influences the patterns of the transitional paths but has no impact on the balanced growth path in either competitive or social optimum allocations. The second-best fiscal policy, therefore, restores the socially optimal balanced growth rate but fails to select the unique transitional path among multiple competitive equilibrium paths in the imperfectly competitive economy.     

The Optimal Privatization Policies under an International Mixed Duopoly

This paper explores the socially optimal privatization policies under the setting of international mixed duopoly. We find that partial privatization is socially optimal under Cournot competition and private leadership competition, whereas full nationalization is socially optimal under public leadership competition. Moreover, the equilibrium social welfare under private leadership competition is higher than that observed under Cournot competition and that observed under private leadership competition, which differs from the findings of Matsumura ( 2003b ). We also show that the endogenous timing game has a subgame perfect Nash equilibrium outcome, under which the government chooses a partial privatization policy, and private leadership competition emerges as the optimal output decision sequence of firms. An important policy implication from this paper is that the government should partially privatize the public firm and facilitate the emergence of private leadership competition in an international mixed market.