The Dynamic Effects of Government Spending Policies in a Two-Sector Endogenous Growth Model.
This paper investigates the impact of government spending policies in a two sector model of endogenous growth. Endogenous growth arises because all factors of production - physical and human capital, are reproducible. Both temporary and permanent government spending shocks are examined. The model implies that a permanent, lump-sum financed, increase in government spending raises the long-run growth rate. This occurs because the negative wealth effects of a spending increase will increase labor supply. On the other hand, an income-tax (or wage-tax) financed rise in government spending reduces the growth rate. The output effects of a temporary increase in government spending may be greater or less than a permanent increase in spending. Copyright 1995 by Ohio State University Press.
Year of publication: |
1995
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Authors: | Devereux, Michael B ; Love, David R F |
Published in: |
Journal of Money, Credit and Banking. - Blackwell Publishing. - Vol. 27.1995, 1, p. 232-56
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Publisher: |
Blackwell Publishing |
Saved in:
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