Optimal size and composition of government spending

doi:10.1016/0889-1583(92)90007-Q

Journal of the Japanese and International Economies

Volume 6, Issue 4, December 1992, Pages 423-439

https://doi.org/10.1016/0889-1583(92)90007-Q Get rights and content

Abstract

Building on the Barro model of government spending and economic growth, this paper investigates the optimal size and composition of government spending. It shows that under general parameter restrictions, the optimal fiscal spending rules may be characterized as being of two distinct types. One is characterized by a high income tax rate, and revenues are used mainly for income transfers. The other is characterized by a relatively low income tax rate, and government spending is largely devoted to public investments. The former is associated with low economic growth rates, while the latter is associated with high growth rates.

References (2)

R. Barro
Government spending in a simple model of endogenous growth
J. Polit. Econ.
(1990)
R. Barro
Economic growth in a cross-section of countries
Quart. J. Econ.
(1991)

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^∗: I thank Professor Mino, Dr. Lee, Professor Salai-I-Martin, and the anonymous referee for helpful comments. Mr. Yang G. Byun's assistance and the partial financial support by the Suam Foundation are gratefully acknowledged.

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Optimal size and composition of government spending

Abstract

Government spending in a simple model of endogenous growth

J. Polit. Econ.

Economic growth in a cross-section of countries

Quart. J. Econ.