The Generational Effects of Fiscal Policy in a Small Open Economy
Gerhard Glomm () and
Public Finance Review, 2012, vol. 40, issue 2, 151-176
The reform of the fiscal system has for many years occupied center stage in policy discussions in developing countries. The authors employ a simple overlapping generations (OLG) model in a small open economy setting to study the impact of fiscal policy reform on the welfare of various generations and on the countryâ€™s growth rate. The authors find that while reallocating public expenditures from transfers to productive expenditures has sizable positive growth effects, individuals who are retired at the time of the policy change experience a welfare loss. However, younger generations experience larger welfare gains. The authors also find that running a public debt to finance transfer payments can decrease growth substantially and only slightly increase welfare of retirees. However, if debt is used to finance education expenditures or infrastructure investment, growth and welfare increase but only in the short run.
Keywords: fiscal policy; transfer payments; education; infrastructure; small open economy (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:40:y:2012:i:2:p:151-176
Access Statistics for this article
More articles in Public Finance Review
Bibliographic data for series maintained by SAGE Publications ().