Characterizing the Optimal Composition of Government Expenditures

Rafaela Perez

Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: This paper extends the neoclassical growth model with productive public capital by including an infrastructure efficiency index, which is assumed to depend on a public choice variable, in particular, the share of public spending allocated to productive public consumption. A golden rule for the allocation of public expenditure between productive consumption and investment is specified. Under this framework, the observed path for the stock of infrastructures and the proposed efficiency index in the US economy during the last fifty years have been close to optimal: a lower stock of infrastructures has been accumulated, but it has been used more efficiently.

Keywords: Neoclassical growth model; Public spending. (search for similar items in EconPapers)
Pages: 29 pages
Date: 2004
New Economics Papers: this item is included in nep-pbe
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Working Paper: Characterizing the Optimal Composition of Government Expenditures (2004)
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