Government Spending in a Simple Model of Endogeneous Growth
Open accessAbstract
One strand of endogenous-growth models assumes constant returns to a broad concept of capital. I extend these models to include tax- financed government services that affect production or utility. Growth and saving rates fall with an increase in utility-type expenditures; the two rates rise initially with productive government expenditures but subsequently decline. With an income tax, the decentralized choices of growth and saving are "too low," but if the production function is Cobb-Douglas, the optimizing government still satisfies a natural condition for productive efficiency. Empirical evidence across countries supports some of the hypotheses about government and growth.
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Saving and investment can promote growth if they flow into infrastructure, basic and applied research, and institutional improvements.
“Saving and investment can also promote growth if they flow into infrastructure (Barro 1990, Canning & Pedroni 2008),basic and applied research ( Jones & Williams 1998, Prettner & Werner 2016, Huang et al. 2023), and institutional improvements (Acemoglu & Robinson 2010).”
From Fertility in High-Income Countries: Trends, Patterns, Determinants, and Consequences (2024) · cites this paper as Barro 1990
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A contribution to the theory of economic growth
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The joint impact of infrastructure and institutions on economic growth
Zergawu, Y. Z., Walle, Y. M., & Giménez-Gómez, J.-M. (2020) · Journal of Institutional Economics · doi:10.1017/s1744137420000016 · Cited by 5 · see citing works
- Authors
- Barro, R. J.
- Affiliations
- National Bureau of Economic Research (US)
- Corresponding author
- Barro, Robert J.
- ORCID
- Barro, Robert J.
- Venue
- Journal of Political Economy
- Publisher
- University of Chicago Press
- Published
- 1990-10
- Volume
- 98
- Issue
- 5, Part 2
- Pages
- S103-S125
- ISSN
- 0022-3808 (ISSN-L)
- 1537-534X
- OpenAlex
- W3122611856
- Cited by
- 6,340
- References
- 1
- Citations by year
- 2026: 272 · 2025: 279 · 2024: 227 · 2023: 265 · 2022: 264 · 2021: 253 · 2020: 264 · 2019: 246 · 2018: 233 · 2017: 264 · 2016: 238 · 2015: 229 · 2014: 266 · 2013: 247 · 2012: 336
- FWCI
- 89.74
- Type
- journal article
- Language
- en
- Open access
- green
- nrs.harvard.edu
- Licence
- cc-by
- Locations
- Journal of Political Economy (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Digital Access to Scholarship at Harvard (DASH) (Harvard University) (submittedVersion, cc-by)
- Funders
- National Science Foundation
- Lynde and Harry Bradley Foundation
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Fiscal Policy and Economic Growth
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Growth and Productivity
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Policies and Impacts
- Keywords
- endogenous growth, government spending, income tax, savings rate, growth rate, Cobb-Douglas production function, productive efficiency
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