Public Spending in a Model of Endogenous Growth with Habit Formation
Author
Source
Discrete Dynamics in Nature and Society
Issue
Vol. 2010, Issue 2010 (31 Dec. 2010), pp.1-22, 22 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2010-09-30
Country of Publication
Egypt
No. of Pages
22
Main Subjects
Abstract EN
This paper introduces habit-forming preferences in a Barro-type endogenous growth model with productive public services.
Government expenditure, which may be subject to congestion, is financed by distortionary income taxation.
Different from the standard time-separable model, the presence of habits makes the economy feature transitional dynamics, which are solved in closed form.
Setting the income tax so as to equate the elasticity of public services in production is shown to maximize both long-run growth and welfare as in the standard model.
This second-best solution coincides with the first-best outcome only in the presence of proportional congestion.
American Psychological Association (APA)
Gómez, Manuel A.. 2010. Public Spending in a Model of Endogenous Growth with Habit Formation. Discrete Dynamics in Nature and Society،Vol. 2010, no. 2010, pp.1-22.
https://search.emarefa.net/detail/BIM-477699
Modern Language Association (MLA)
Gómez, Manuel A.. Public Spending in a Model of Endogenous Growth with Habit Formation. Discrete Dynamics in Nature and Society No. 2010 (2010), pp.1-22.
https://search.emarefa.net/detail/BIM-477699
American Medical Association (AMA)
Gómez, Manuel A.. Public Spending in a Model of Endogenous Growth with Habit Formation. Discrete Dynamics in Nature and Society. 2010. Vol. 2010, no. 2010, pp.1-22.
https://search.emarefa.net/detail/BIM-477699
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-477699