We introduce public capital and public services as inputs in an endogenous growth model. We show that the growth rate depends on the apportionment of tax revenues between the accumulation of public capital and the provision of public services. When public spending is financed by proportional...

The role of fiscal policy is examined when public goods provide both productive and utility services. In the presence of congestion, the consumption tax is shown to be distortionary. Optimal fiscal policy involves using consumption-based instruments in conjunction with the income tax. An income...

In this paper we examine the implication of a simple class of fiscal rules for long-run economic growth and welfare. The golden rule of public finance (GRPF) that we examine is motivated by institutional arrangements in countries such as Germany and the UK. We find that rules which seek to limit...