Ramsey Fiscal Policy And Endogenous Growth: A Comment

Recently, Park (2009, Economic Theory 39, 377 - 398) extended the Barro endogenous growth model (1990) by assuming that tax rate is optimally chosen by the government and labor supply is elastic. Park claimed to have proved the existence of multiple balanced growth paths that exhibit zero growth rate and local indeterminacy. In this paper, it is shown that his claim is incorrect. The model has a unique balanced growth path that may exhibit positive growth, and the model has no transitional dynamics.

Provided by: National Tsing Hua University Topic: Big Data Date Added: Sep 2010 Format: PDF

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