Productive government expenditure and fiscal sustainability

Real Arai ()

MPRA Paper from University Library of Munich, Germany

Abstract: We consider an overlapping generations model in which public spending directly contributes to grow up productivity as Barro (1990) and a government comforms the constant spending-GDP and debtspending ratio rules. We analyse policy effects on fiscal sustainability, growth rate and welfare. This paper gives some remarks as follows: First, we demonstrate that when spending-GDP ratio rises it may be more sustainable fiscal policy. Second, we show analytically that if higher spending-GDP ratio is more sustainable fiscal policy, it brings higher growth rate in both short-term and long-term. Third, such policy change is Pareto improving. These remarks are not obtained in previous researches on fiscal sustainability.

JEL-codes: E62 H54 H63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
Date: 2008-05-02
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http://mpra.ub.uni-muenchen.de/8553/ orginal version
http://mpra.ub.uni-muenchen.de/8560/ revised version

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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:8553

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