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By Thomas Steger

Four stylised evidence of mixture fiscal development are arrange first and foremost. the expansion method is interpreted to symbolize transitional dynamics instead of balanced-growth equilibria. in contrast historical past, the elemental significance of subsistence intake is comprehensively analysed. accordingly, the which means of the productive-consumption speculation for the intertemporal intake trade-off and the expansion method is investigated. ultimately, the method of progress is analysed empirically via cross-sectional conditional convergence regressions with endogenous keep watch over variables.

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Extra info for Transitional Dynamics and Economic Growth in Developing Countries

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If tax revenues are 'thrown away', growth and welfare decrease. If tax revenues finance public consumption, and public consumption enters the utility function, growth decreases but welfare does not necessarily fall (Rebelo, 1992, pp. 10/11). If tax revenues finance public goods which are inputs in production, the effect on growth and welfare is unequivocal (Barro, 1990). 82 The Jones-Manuelli property also applies for a CES function with two inputs and an elasticity of substitution greater than unity (Easterly, 1994, p.

Third, the starting point of the forward solution is chosen to be located on this trajectory slightly above (c,k ). The initial values of the backward solution are sufficiently high in the following Extensions ofthe basic linear growth model 49 The most important difference between the linear growth model with Stone-Geary preferences and the Jones-Manuelli model with Stone-Geary preferences concerns the possibility to reproduce non-monotonic dynamics of growth rates. 25) indicates that there are two opposing forces governing the dynamics of growth rates.

25) c8 The preceding equation shows the Keynes-Ramsey rule of optimal consumption. Similarly to the linear growth model with Stone-Geary preferences, the first term on the right-hand side represents the IES, while the second term shows the difference between the net marginal product of capital and the time preference rate. 25) indicates the possibility of different dynamic equilibria which are investigated within the next section. In addition, in the case of growth there are two opposing forces affecting the evolution of the growth rate of consumption.

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