Government Expenditure Financing, Growth, and Factor Intensity

Kuo-hao Lee

International Journal of Business and Management, 2016, vol. 11, issue 4, 178

Abstract: By shedding light on the factor intensity, this paper incorporates the Romer (1986)-type knowledge spillover technology into the Uzawa (1961, 1963) two-sector model of consumption and investment goods and studies the effect of the ratio of government expenditure to total output on the economic growth rate under three types of tax financing schemes- lump-sum tax financing, income tax financing, and consumption tax financing. We find that a rise in government expenditure with lump-sum tax financing has an ambiguous effect on the balanced growth rate depending on the factor intensity between the sectors. The balanced growth rate decreases (increases) with a rise in government spending if the consumption (investment) goods sector is capital-intensive. Moreover, the result of consumption tax financing is equivalent to lump-sum tax financing, while an increase in the government expenditure with income tax financing reduces the balanced growth rate. Our two-sector model with lump-sum tax or consumption tax financing seems to be able to provide a channel through which to explain the mixed empirical findings.

Date: 2016
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.ccsenet.org/journal/index.php/ijbm/article/download/56920/31081 (application/pdf)
http://www.ccsenet.org/journal/index.php/ijbm/article/view/56920 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijbmjn:v:11:y:2016:i:4:p:178

Access Statistics for this article

More articles in International Journal of Business and Management from Canadian Center of Science and Education Contact information at EDIRC.
Bibliographic data for series maintained by Canadian Center of Science and Education ().