1. Public spending and growth: A simple model.
- Author
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Sardoni, Claudio
- Subjects
- *
PUBLIC spending , *RATINGS & rankings of public debts , *PUBLIC investments , *AGGREGATE demand , *ECONOMIC systems - Abstract
The major crises that hit the world economy in the last 15 years caused a growing presence of the state in the economy. Deep crises almost inevitably give rise to growing public interventions to avoid the collapse of the economic and social system. However, the demand for more state interventions does not make it less important to be concerned about the extension and quality of these interventions in order to contain their possible negative effects on the economy as a whole. The paper is an attempt at dealing with these issues by using a simple growth model inspired by Domar's contributions. The main result is that state interventions can produce positive effects on the economy by not simply increasing aggregate demand but, most of all, by contributing to raise the productivity and the rate of growth of the economy. An objective that can be realized by mainly devoting public outlays to investment in physical and human capital (defined as productive public expenditures). • The crises that recently hit the world economy caused a growing presence of the state in the economy. • The issue is dealt with by focusing on the effects of public spending on the economy's growth rate. • Public spending can positively affect the growth rate by raising the economy's productivity. • Productivity is raised by concentrating outlays on investment in physical and human capital. • At higher growth rates the ratio Public Debt/GDP can be stabilized in spite of primary deficits. [ABSTRACT FROM AUTHOR]
- Published
- 2024
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