Growth, Congestion of Public Goods, and Second-Best Optimal Policy: A Dynamic Analysis
Romano Piras ()
Rivista italiana degli economisti, 2005, issue 3, 397-416
This paper presents a general equilibrium endogenous growth model in which public spending is divided between public productive services and public consumption. A distinguishing feature of the model is the assumption that both components of public spending can be overused and, thus, congested by the private agents. We study the second-best dynamics of the model and prove that it is determinate. In addition, we show that, although there could be different outcomes for the second-best problem, the optimal second-best policy is unique. Finally, the relationship between congestion and the optimal second-best policy, on the one hand, and congestion and the equilibrium growth rate, on the other, is established.
Keywords: Endogenous growth; congestion; public spending; second-best. (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:mul:jqat1f:doi:10.1427/22134:y:2005:i:3:p:397-416
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