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Coordinating short-and long-run public investment rules

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Marrero, Gustavo A. (2001) Coordinating short-and long-run public investment rules. [ Documentos de trabajo. Instituto Complutense de Análisis Económico (ICAE); nº 09, 2001, ]

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Official URL: http://eprints.ucm.es/6793/


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Abstract

Se analiza, dado un objetivo a largo plazo del ratio inversión pública/PIB, este ratio, además va a reaccionar a lo largo de la transición según el estado de la economía. Esta regla de inversión pública es mas flexible que la que es comunmente considerada en la literatura, donde la ratio inversión publica/PIB es constante. En comparación con esta simple regla, y bajo regímenes impositivos alternativos, se obtienen importantes ganancias de bienestar al coordinar de manera óptima la política de corto y largo plazo.

Modelling the accumulation rule evolving public investment is an issue of utmost interest
among economists and politicians. The present paper extends the Barro (1990)
model of productive government expenditure by considering a time-adapted rule for the
public investment/output ratio. The rule allows a particular target on the public investment
ratio to be achievable in the long-run. Additionally, throughout the transition, the
government may adjust its period-by-period public investment/output ratio in response
to the current productivity of public capital relative to its long-run level. The degree of
this response depends on a short-run policy instrument, which is decided by the fiscal
authority simultaneously to the long-run target ratio. That way, the government problem
could be interpreted as a coordination problem between short- and long-term policies. In
comparison with a constant-ratio rule, and under alternative taxing scenarios, important
welfare improvements are found when coordinating the short- and the long-run policy
instruments in an optimal way.


Item Type:Working Paper or Technical Report
Additional Information:

JEL Classification: E0, E6, O4.

Uncontrolled Keywords:Política fiscal, ratio inversión publica/PIB
Subjects:Social sciences > Economics > Public economy
Series Name:Documentos de trabajo. Instituto Complutense de Análisis Económico (ICAE)
Volume:2001
Number:09
ID Code:6793
Deposited On:30 Nov 2007
Last Modified:06 Feb 2014 07:51

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