Endogenous Growth Through Government Policy

This paper illustrates two reasonable political decision mechanisms by which fiscal policy generates endogenous growth under a constant returns to scale production technology, absent externalities. Based on the dynamics induced by various policy choices, we demonstrate that policies that maximize capital deepening generate balanced growth and are Pareto optimal. In contrast, policies chosen by the median voter produce balanced growth, but are suboptimal.public investment; positive political economy; median voter theorem; endogenous growth

Growth of Government And The Politics of Fiscal Policy

U.S. government expenditures increased rapidly during the post-war period, then slowed in the 1980s and began falling in 1992. To examine the dynamics of the growth and subsequent reduction in government spending, we present a dynamic general equilibrium model in which politicians choose government spending to maximize support by their constituents. The model predicts that government expenditures will initially mimic Wagner's law - the tendency for government spending to increase with GDP - but eventually diverge from output due to the growth of the welfare state. After government expenditures become large, we identify an endogenous threshold on the economy's growth path where it is optimal for politicians to shrink the welfare sate, cut taxes, and stimulate output growth. We show that the policies chosen by politicians are Pareto suboptimal and cause endogenous cycles in output. Such cycles are of several types, and we characterize when the equilibrium growth path will result in a reduction in the size of the welfare state, as well as when the welfare state cycles between small and large.government expenditures; growth; Wagner's Law; endogenous cycles

Dynamical Disentanglement across a Point Contact in a Non-Abelian Quantum Hall State

We analyze tunneling of non-Abelian quasiparticles between the edges of a quantum Hall droplet at Landau level filling fraction nu=5/2, assuming that the electrons in the first excited Landau level organize themselves in the non-Abelian Moore-Read Pfaffian state. We formulate a bosonized theory of the modes at the two edges of a Hall bar; an effective spin-1/2 degree of freedom emerges in the description of a point contact. We show how the crossover from the high-temperature regime of weak quasiparticle tunneling between the edges of the droplet, with 4-terminal R_{xx} scaling as T^{-3/2}, to the low-temperature limit, with R_{xx} - h/(10 e^2) scaling as -T^4, is closely related to the two-channel Kondo effect. We give a physical interpretation for the entropy of \ln(2\sqrt{2}) which is lost in the flow from the ultraviolet to the infrared.Comment: 4 pages, 1 figur

Growth of Government And The Politics of Fiscal Policy

U.S. government expenditures increased rapidly during the post-war period, then slowed in the 1980s and began falling in 1992. To examine the dynamics of the growth and subsequent reduction in government spending, we present a dynamic general equilibrium model in which politicians choose government spending to maximize support by their constituents. The model predicts that government expenditures will initially mimic Wagner's law - the tendency for government spending to increase with GDP - but eventually diverge from output due to the growth of the welfare state. After government expenditures become large, we identify an endogenous threshold on the economy's growth path where it is optimal for politicians to shrink the welfare sate, cut taxes, and stimulate output growth. We show that the policies chosen by politicians are Pareto suboptimal and cause endogenous cycles in output. Such cycles are of several types, and we characterize when the equilibrium growth path will result in a reduction in the size of the welfare state, as well as when the welfare state cycles between small and large

Optimal Fiscal Policy in an Economy Facing Socio-Political Instability

We present a model of optimal government policy when policy choices may exacerbate socio-political instability (SPI). We show that optimal policy that takes into account SPI transforms a standard concave growth model into a model with both a poverty trap and endogenous growth. The resulting equilibrium dynamics inherit the properties of government policies and need not be monotone. Indeed, for a broad set of conditions we demonstrate that government policy is unable to eliminate the poverty trap; when these conditions do not hold, "most" countries eventually reach a balanced growth path. The predictions of the model are tested by developing three new measures of SPI for a panel of 58 countries. Estimating optimal policies and the growth equation derived from the model reveals strong support for the theory. In particular, we show via simulations that optimal funding for public investment and the police cause a typical developing economy to expand on a quasi-linear growth path, with the baseline level of SPI determining whether growth is positive or negative.Socio-Political Instability, Endogenous Growth, Public Investment, Political Economy of Growth

Endogenous Growth Through Government Policy

This paper illustrates two reasonable political decision mechanisms by which fiscal policy generates endogenous growth under a constant returns to scale production technology, absent externalities. Based on the dynamics induced by various policy choices, we demonstrate that policies that maximize capital deepening generate balanced growth and are Pareto optimal. In contrast, policies chosen by the median voter produce balanced growth, but are suboptimal

The politics of endogenous growth

Is it politically feasible for governments to engineer endogenous growth? This paper illustrates two reasonable political decision mechanisms by which fiscal policy generates endogenous growth with a single accumulable factor, under a constant returns to scale production technology, and without production externalities. In the first mechanism, optimal policies are chosen by the government to maximize constituent support by raising aggregate income. In the second mechanism, optimal policies are determined in a voting equilibrium where agents are concerned only with their own incomes. We demonstrate that policies that target aggregates generate balanced growth and are Pareto optimal. Policies chosen by the median voter also produce balanced growth, but result in public investment 50% below the socially optimal level

Optimal Fiscal Policy in an Economy Facing Socio-Political Instability

We present a model of optimal government policy when policy choices may exacerbate socio-political instability (SPI). We show that optimal policy that takes into account SPI transforms a standard concave growth model into a model with both a poverty trap and endogenous growth. The resulting equilibrium dynamics inherit the properties of government policies and need not be monotone. Indeed, for a broad set of conditions we demonstrate that government policy is unable to eliminate the poverty trap; when these conditions do not hold, "most" countries eventually reach a balanced growth path. The predictions of the model are tested by developing three new measures of SPI for a panel of 58 countries. Estimating optimal policies and the growth equation derived from the model reveals strong support for the theory. In particular, we show via simulations that optimal funding for public investment and the police cause a typical developing economy to expand on a quasi-linear growth path, with the baseline level of SPI determining whether growth is positive or negative

Non-monotonic diffusion rates in atom-optics L\'{e}vy kicked rotor

The dynamics of chaotic Hamiltonian systems such as the kicked rotor continues to guide our understanding of transport and localization processes. The localized states of the quantum kicked rotor decay due to decoherence effects if subjected to stationary noise. The associated quantum diffusion increases monotonically as a function of a parameter characterising the noise distribution. In this work, for the Levy kicked atom-optics rotor, it is experimentally shown that by tuning a parameter characterizing the Levy distribution, quantum diffusion displays non-monotonic behaviour. The parameters for optimal diffusion rates are analytically obtained and they reveal a good agreement with the cold atom experiments and numerics. The non-monotonicity is shown to be a quantum effect that vanishes in the classical limit.Comment: 5 pages, revte