Welfare and fiscal policy with public goods and infrastructure

Resumo

We construct and simulate a model to study the welfare and macroeconomic impact of government actions when its productive role is taken into account. The trade-off between public investment and public consumption is also investigated, since public consumption is introduced as a public good that directly affects individuals' well-being. Our results replicate econometric evidence showing that part of the observed slowdown of U.S. productivity growth can be explained by the reduction of investment in infrastructure, which also implied a sizable welfare loss to the population. Depending on the methodology used we found a welfare cost ranging from 4.2% to 1.16% of GNP. The impact of fiscal policy can be qualitative and quantitative distinct depending on whether we assume a higher or smaller output-elasticity to infrastructure. If it is high enough, increases in tax rates may stimulate accumulation and production, which is the opposite prediction of standard neoclassical models.

Ficha do documento

Tipo

Estudo

Ano

1995

Instituição

Escola de Pós-Graduação em Economia da FGV

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Não informado

Identificador

oai:repositorio.fgv.br:10438/469

Temas

EconomiaInfraestruturaFinanças Públicas

Palavras-chave

WelfareInfrastructureLabor productivityFiscal PolicyEconomiaPolítica tributáriaDespesa públicaInvestimentos públicosConsumo (Economia)Infraestrutura (Economia)