Growth, Debt and Public Infrastructure

Thomas Krichel () and Paul Levine ()

Department of Economics Discussion Papers from Department of Economics, University of Surrey

Abstract: The paper presents a closed economy model of endogenous growth driven by capital externalities arising from both private capital and public infrastructure. The model is calibrated to fit data for India, an approxmiately closed economy. Simulations suggest that fiscal policy certainly matters and the choice of the income taxation rate, the mix of government spending between infrastructure and public consumption goods, and the long-run government debt/GDP ratio can all significantly affect the long-run growth rate. Intertemporal aspects of fiscal policy are also important and the precommitment and non-precommitment policies differ substantially.

Keywords: endogenous growth; fiscal policy; time inconsistency. (search for similar items in EconPapers)
JEL-codes: C61 E21 E23 E62 O41 (search for similar items in EconPapers)
Date: Written 1994-04
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Related works:
Journal Article: Growth, Debt and Public Infrastructure (1995)
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