Economic Growth, Public Debt and Welfare: Comparing Three Budgetary Rules

Alfred Greiner

German Economic Review, 2011, vol. 12, issue 2, 205-222

Abstract: We present an endogenous growth model with externalities of capital and elastic labor supply where we allow for public debt and welfare-enhancing public spending. We analyze different debt policies as regards convergence to a balanced growth path and their effects on long-run growth and welfare. Three budgetary rules are considered: the balanced budget rule, a budgetary rule where debt grows in the long run but at a rate lower than the balanced growth rate and a rule where public debt grows at the same rate as all other economic variables but where it guarantees that the intertemporal budget constraint is fulfilled.

Keywords: Intertemporal budget constraint; balanced budget; endogenous growth; welfare (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1111/j.1468-0475.2010.00516.x

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