Budget Deficits and Economic Growth

Koichi Futagami, 孝一 二神, コウイチ フタガミ, Akihisa Shibata, 章久 柴田 and アキヒサ シバタ

No 133, Discussion Paper from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: This paper investigates the sustainability and welfare effects of government budget deficits by using a simple endogenous growth model with overlapping generations. It is shown that, if the initial volume of government debt and the ratio of primary budget deficits to GDP are not large, then there can exist two steady-growth equilibria, one of which is associated with a higher growth rate and the other of which is associated with a lower growth rate. It is also shown that changes in government spending cannot be Pareto improving although they affect the long-run growth rate and each generation's utility.

Keywords: endogenous growth; sustainability of government budget deficits; welfare effects (search for similar items in EconPapers)
JEL-codes: E62 H63 O41 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2003-01
Note: January 8, 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Budget Deficits and Economic Growth (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:piedp1:133

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