Productive government spending and its consequences for the growth-inequality tradeoff

Show simple item record Getachew, Yoseph Turnovsky, Stephen J. 2016-04-21T06:59:23Z 2015-05
dc.description.abstract This paper investigates the effects of productive government spending on the relationship between growth and inequality in an economy subject to idiosyncratic production shocks and heterogeneous endowments. Assuming lognormal distributions, we derive tractable closed form solutions describing the equilibrium dynamics. We show how the effect of government investment on the equilibrium dynamics of both inequality and growth depends crucially upon the elasticity of substitution between public and private capital in production. This has important consequences for the growth- and welfaremaximizing rates of government investment. Finally, we supplement our theoretical analysis with numerical simulations, calibrated to approximate the productive characteristics of a real world economy. With the empirical evidence strongly supporting the complementarity between public and private capital, our simulations suggest that conclusions based on the commonly employed Cobb-Douglas production function may be seriously misleading. en_ZA
dc.description.department Economics en_ZA
dc.description.embargo 2016-05-31
dc.description.librarian hb2016 en_ZA
dc.description.uri en_ZA
dc.identifier.citation Getachew, Y & Turnovsky, SJ 2015, 'Productive government spending and its consequences for the growth-inequality tradeoff', Research in Economics, vol. 69, pp. 621-640. en_ZA
dc.identifier.issn 1090-9443 (print)
dc.identifier.issn 1090-9451 (online)
dc.identifier.other 10.1016/j.rie.2015.09.001
dc.language.iso en en_ZA
dc.publisher Elsevier en_ZA
dc.rights © 2015 University of Venice Published by Elsevier Ltd. All rights reserved. Notice : this is the author’s version of a work that was accepted for publication in Research in Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. A definitive version was subsequently published in Research in Economics, vol. 69, pp. 621-640, 2015. doi : 10.1016/j.rie.2015.09.001. en_ZA
dc.subject Government investment en_ZA
dc.subject Idiosyncratic shocks en_ZA
dc.subject Growth en_ZA
dc.subject Inequality en_ZA
dc.title Productive government spending and its consequences for the growth-inequality tradeoff en_ZA
dc.type Postprint Article en_ZA

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