A model of the optimal allocation of government expenditures

Simon, Fan (), Yu, Pang () and Pierre Pestieau
Additional contact information
Simon, Fan: Lingnan University
Yu, Pang: Macau University of Science and Technology

No 2019018, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Government expenditures can be used for various socio-economic objectives, including public education, consumption of public goods and services, and social protection. This paper analyzes the optimal allocation of public expenditures among these competing functions. We establish an overlapping generations model with heterogeneous individuals in which the government optimally chooses income tax, transfer payment, educational spending, and public consumption. Our model characterizes the transitional dynamics and the steady state of each function with and without a pay-as-you-go international contract. We also conduct a simulation illustrating that the presence of an intergenerational contract may raise public consumption and social welfare in the ssteady state.

Keywords: government spending; public education; public consumption; individual heterogeneity (search for similar items in EconPapers)
JEL-codes: H20 H31 H50 (search for similar items in EconPapers)
Date: 2019-11-27
New Economics Papers: this item is included in nep-age, nep-dge, nep-pbe and nep-pub
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: A model of the optimal allocation of government expenditures (2020)
Working Paper: A model of the optimal allocation of government expenditures (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2019018

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