Growth and fiscal policy: a positive theory
Levon Barseghyan () and
Marco Battaglini ()
No 1418, Working Papers from Princeton University, Department of Economics, Econometric Research Program.
We present a political economy theory of growth in which the government affects the growth rate both directly through public investments in infrastructure, and indirectly through the effect of taxation on learning by doing. Policy choices are made by a legislature consisting of representatives elected by geographically defined districts. The legislature can raise revenues via a discretionary income tax and by issuing public debt. We study the equilibrium relationship between the dynamics of debt and the growth rate of the economy. We use the model to study the impact of an austerity program in which a country is forced to reduce the debt/GDP ratio. To quantify these effects, the model is calibrated to the U.S. economy.
Keywords: GDP; growth rate; public investments; debt; revenue; taxes (search for similar items in EconPapers)
JEL-codes: D01 E01 E60 H30 H50 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
http://detc.princeton.edu/wp-content/uploads/2016/ ... ghyan_Battaglini.pdf
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:pri:metric:wp041_2012_barseghyan_battaglini.pdf
Access Statistics for this paper
More papers in Working Papers from Princeton University, Department of Economics, Econometric Research Program. Contact information at EDIRC.
Bibliographic data for series maintained by Bobray Bordelon ().