Government expenditure, external and domestic public debt, and economic growth
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- Cuong Le Van
- IPAG, CNRS, PSE, APD TIMAS France
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- Phu Nguyen‐Van
- BETA, CNRS INRA and Université de Strasbourg & TIMAS, Thang Long University Vietnam
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- Amélie Barbier‐Gauchard
- BETA, CNRS INRA and Université de Strasbourg Strasbourg France
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- Duc‐Anh Le
- BETA, CNRS INRA and Université de Strasbourg Strasbourg France
抄録
<jats:title>Abstract</jats:title><jats:p>This paper analyzes the relationship between government expenditure, tax on returns to assets, public debt, and growth in an endogenous growth model. Public debt is composed of two components, domestic debt and external debt. We show conditions for existence, uniqueness, and multiplicity of the steady states. More precisely, existence of steady state requires a sufficiently high productivity and a sufficiently low tax on returns to assets. We also provide the effects of an increase in the tax rate on returns to assets on the steady state. In particular, the relation between public spending and the tax rate has a bell shape. Domestic debt unambiguously increases with tax whereas external debt displays an inverted U‐shaped curve. A high tax rate leads to a reallocation of public debt in favor of domestic debt (to the detriment of external debt). The effect of taxation on consumption (and production) also displays a nonlinear pattern when the output elasticity of capital is lower than unity (the effect is monotonously increasing if this elasticity is unity). We also derive the conditions under which a tax increase can boost or reduce the balanced growth rate.</jats:p>
収録刊行物
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- Journal of Public Economic Theory
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Journal of Public Economic Theory 21 (1), 116-134, 2018-08-02
Wiley