This paper assesses the effect of fiscal policy on economic growth in an AK model with endogenous labor supply. It is found that the structure of taxation and government expenditure could affect the long-run growth rate through their effect on households’ labor-leisure choice, saving-consuming...

This paper develops a non-linear theoretical relationship between public spending and economic growth. The model identifies the “optimal” size of government and the “optimal” composition of government spending. Given the size of the government, different allocations of public resources...

This paper quantifies the welfare effects of the Spanish public investment in infrastructures. For that purpose, we use data on Spanish economy to calibrate a dynamic general equilibrium model with a representative agent, where public investment is financed by means of distortionary taxes. As is...

This paper analyses the effect of public expenditures in the context of a modified Solow model of capital accumulation with optimising agents. The model identifies optimal government size and optimal composition of public expenditures which maximize the rate of growth in the dynamics to the...

Empirical studies of the relation between government size and economic growth come to widely different conclusions. In part this may reflect the fact that many studies report regressions that contain severe multicollinearity, heteroscedasticity, simultaneity and other specification problems....

We estimate the growth and utility effects of switching from a graduated-rate federal income tax to a flat tax along the lines of Hall-Rabushka (1995). We, furthermore, calculate the post-reform transition dynamics for a number of variables, including the economic growth rate, the representative...

Macroeconomic studies of tax policy in dynamic general equilibrium usually assume that reforms hit the economy unexpectedly and last forever. Here, we explore how previous results change when we allow policy changes to be pre-announced and of finite duration and when these facts are anticipated...

Recent empirical studies have revealed a strong impact of tax changes on corporate finance. Yet, models of economic growth usually neglect financial structure of the representative firm. In order to investigate whether the consideration of firm finance modifies the estimated outcome of capital...

The relative size of the State in industrialized economies has increased dramatically during the past century giving rise to legitimate fears that such a trend might end up having an adverse impact on growth. This paper explores the relationship between the development of government activities...