Productive government expenditures and long-run growth

Abstract

The purpose of this paper is to review some of the recent developments in endogenous growth models. Specifically, our focus is on the growth effects of productive government spending in dynamic general equilibrium models. We use a simple overlapping generations model as our basic framework and illustrate the role of taxes and spending. We then examine several related issues: nonrivalry in publicly provided goods, existence and uniqueness of competitive equilibrium, endogenous public policy, ways of financing public expenditures, composition of publicly provided goods and services, and private alternatives. Finally, we review some empirical results related to output elasticity of public capital and educational expenditures.

Efeitos de Crescimento e Bem-estar da Lei de Parceria Público-Privada no Brasil

“…onde: A é um parâmetro de escala; θ, φ e γ são parâmetros não negativos, tais que θ + φ + γ < 1; as variáveis agregadas per capita Y , H, K e G são, respectivamente, o produto ou renda total, o número de horas trabalhadas, o estoque de capital e o estoque de infra-estrutura e, por fim; a expressãoḠ γ representa o efeito externo positivo (sobre a produtividade total dos fatores) promovido pelo estoque de infra-estrutura G, cuja intensidade é determinada pelo parâmetro γ. Esta especificação segue de perto Turnovsky e Fisher (1995) e Glomm e Ravikumar (1994, 1997 que assumem retornos constantes de escala aos fatores privados. A equação (1) é a função de produção com que se depara a firma representativa, a qual, em cada instante t, escolhe os níveis de trabalho (H), capital (K) e infra-estrutura (G) de forma a maximizar seu lucro, tomando como dados preços e a oferta de infra-estrutura per capita da economia (Ḡ).…”

Infrastructure provision and macroeconomic performance

“…14 Comparing (17a)-(17c) with (24) and (25), we see that the mode of infrastructure provision (private or public) generates fundamental di¤erences with respect to the design of optimal …scal policy. While the optimal income tax and expenditure (subsidy) rates in a privatized economy are constant throughout transition, the optimal income tax rate under government provision must be time-varying until it reaches the steady-state equilibrium.…”

“…If the government sets^ y according to (24), the adjustment path followed by the decentralized economy will fail to replicate that of its centrally planned counterpart.…”

“…Though Barro (1990) revived this discussion in the context of endogenous growth, these early papers assumed non-rivalry in modeling public investment. Later contributions, however, have incorporated rivalry in growth models, mainly in the form of congestion; See, for example, Turnovsky (1996), Glomm and Ravikumar (1997), and Fisher and Turnovsky (1998). Excludability has been studied extensively in the public economics literature, as in Brito and Oakland (1980), Burns and Walsh (1981) and Fraser (1996).…”

“…The …rst mention of the possibility of private provision can be found in Glomm and Ravikumar (1997), though they do not provide any formal treatment.…”