Regional growth strategies: fiscal versus institutional governmental policies

Ingrid Ott () and Susanne Soretz
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Ingrid Ott: Institute of Economics, University of Lüneburg

No 30, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

Abstract: This paper analyzes the growth impact of fiscal and institutional governmental policies in a regional context. The government provides a productive input that is complementary to private capital. Institutional policies include the decision about the type of public input as well as on the size of the region as determined by the number of firms. Fiscal policies decide on the extent of the public input. Private capital accumulation incurs adjustment costs that depend upon the ratio between private and public investment. After deriving the decentralized equilibrium, fiscal and institutional policies as well as their interdependencies and welfare implications are discussed. Due to the feedback effects both policies may not be determined interdependently. It is also shown that depending on the region`s size different types of the public input maximize growth.

Keywords: Fiscal and institutional policy; regional growth; adjustment costs; congested public inputs (search for similar items in EconPapers)
JEL-codes: H40 H54 O41 R13 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2006-09-22
New Economics Papers: this item is included in nep-cse, nep-geo and nep-pbe
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