Dynamic Analysis of an Endogenous Growth Model with Public Capital.

This paper develops an endogenous growth model with productive public capital along with private capital in a spirit similar to that of R. J. Barro (1990). Since the authors' model includes two stock variables, it has transitional dynamics unlike most of the previous studies on endogenous growth, including Barro's, where concerns are restricted to the steady state analysis. First, they show that the transitional path is unique and stable. Second, the character of the transitional path is explored. Third, the authors show that the optimal tax rate is smaller than the rate that maximizes the national growth rate with a log-linear utility function. Copyright 1993 by The editors of the Scandinavian Journal of Economics.