Characterizing the Optimal Composition of Government Expenditures

This paper extends the neoclassical growth model with productive public capital by including an infrastructure efficiency index, which is assumed to depend on a public choice variable, in particular, the share of public spending allocated to productive public consumption. A golden rule for the allocation of public expenditure between productive consumption and investment is specified. Under this framework, the observed path for the stock of infrastructures and the proposed efficiency index in the US economy during the last fifty years have been close to optimal: a lower stock of infrastructures has been accumulated, but it has been used more efficiently.Public Expenditure Composition, Public Investment, Public Consumption, Nominal and Effective Infrastructures, Infrastructures Efficiency Index

Characterizing the Optimal Composition of Government Expenditures

This paper extends the neoclassical growth model with productive public capital by including an infrastructure efficiency index, which is assumed to depend on a public choice variable, in particular, the share of public spending allocated to productive public consumption. A golden rule for the allocation of public expenditure between productive consumption and investment is specified. Under this framework, the observed path for the stock of infrastructures and the proposed efficiency index in the US economy during the last fifty years have been close to optimal: a lower stock of infrastructures has been accumulated, but it has been used more efficiently.Este artículo extiende el modelo neoclásico de crecimiento con capital público productivo mediante la incorporación de un índice de eficiencia de las infraestructuras. Este índice se supone dependiente de una variable de elección del gobierno, en concreto, el porcentaje del gasto público destinado a consumo público productivo. Se propone una regla de oro para la distribución del gasto público entre consumo productivo e inversión. Bajo este contexto, las sendas temporales observadas en los últimos cincuenta años en la economía estadounidense para el stock de infraestructuras y el índice de eficiencia propuesto han sido cercanas a las sendas óptimas:se ha acumulado un menor stock de infraestructuras, pero también se ha utilizado de forma más eficiente.Neoclassical growth model, Public spending.

Tax Reforms in an Endogenous Growth Model with Pollution

This paper discusses the effects of a green tax reform in an AK growth model without abatement activities and with a negative environmental externality in utility function. There is also a non-optimal level of public spending. The results depend on the financing source of public spending. When there is not public debt, a revenue-neutral green tax reform has not any effect on pollution, growth and welfare. On the contrary, when short-run deficits are financed by debt issuing, a variety of green tax reforms increase welfare. Nevertheless, in this framework, non-green tax reforms are also welfare improving.Environmental externalities, Economic growth, Pollution taxes, Laffer Curve.

Environmental fiscal policies might be ineffective to control pollution

In a one sector growth model with pollution in the utility function, the competitive equilibrium can be indeterminate for plausible values of the intertemporal substitution elasticity of consumption and under constant returns to scale. The tax rate on pollution does not enter the condition characterizing indeterminacy. This means that the government is not able to control emissions in the economy by using environmental policies. Non-separability between private consumption and pollution in the utility function is crucial for this result.Indeterminacy, Environmental taxes, Pollution

Double Dividend in an Endogenous Growth Model with Pollution and Abatement

This paper discusses wether by implementing an environmental tax reform, a government may achieve a double dividend. We consider the simplest endogenous growth model (AK model) and include a negative environmental externality in the utility function. Pollution flow can be reduced by means of private abatenment activities. There is a predetermined non-optimal level of public spending financed by environmental taxes and pre-existing taxes on income and consumption. The major contribution of the paper is to show that, under this simple framework, a double dividend may arise if tax reform consists of substituing environmental tax for income tax, in such a way that the government budget constraint holds in a present value sense.Environmental tax reform, Double dividend, Abatement activities.

Un modelo de Uso Eficiente de las Infraestructuras Públicas

This paper designs a general equilibrium model with a public sector which builds up public infrastructure. Public consumption expenditure is necessary for an efficient use of public physical capital, so there exists a productive effect for such type of public spending. The normative results derived from this framework are then confronted to the standard non-productive public consumption model. Under the assumption of efficient public consumption, the percentage of total public expenditure that must be allocated to consumption is strictly positive. This optimal percentage is obtained from the equilibrium between two opposite effects led by public consumption on public physical capital: a positive efficiency effect and a negative crowding-out effect.En este artículo se formula un modelo teórico de equilibrio general con un sector público que acumula infraestructuras, en el que se incorpora un papel productivo para cierto consumo público que contribuye a un uso eficiente del capital público físico. Este modelo, de Uso Eficiente de las Infraestructuras, permite obtener conclusiones radicalmente distintas a las del modelo estándar de consumo público no productivo: bajo la hipótesis de consumo público eficiente, el Ratio de Composición del Gasto Público óptimo (la proporción de gasto público que debe destinarse a consumo) es estrictamente positiva. Este Ratio de Composición óptimo viene determinado por el equilibrio entre dos tipos de efectos que genera el consumo público sobre las infraestructuras nominativas: un efecto eficiencia positivo y un efecto desplazamiento negativo.

Global and local indeterminacy and optimal environmental public policies in an economy with public abatement activities

We study the dynamic properties of an endogenous growth model with pollution in which the government can control the pollution through distorting taxes on the pollutant firms and through public abatement activities. First, we characterize the conditions for indeterminacy of equilibria when the government is benevolent and chooses its tax policy by taking into account the decentralized competitive equilibrium. Under this second best setup we show that two balanced growth paths can be found (one with a low level of pollution and the other with a high level) both of which can be locally indeterminate. Therefore, under indeterminacy, the optimal public policies do not guarantee that the economy will converge towards the steady state characterized by a low level of pollution and neither guarantee that the economy will display, along the transition, low levels of pollution. Second, we show that the central planner solution might also display indeterminacy; in particular, two Pigouvian taxes can be found.Global and local indeterminacy, Environmental taxes, Pollution, Abatement, Pigouvian taxes

Evidence about asymmetric price transmission in the main European fuel markets: from TAR-ECM to Markov-switching approach

This paper presents new evidence on the existence of asymmetries in the transmission of shocks in oil prices in the main European fuel markets and their relation to the so-called rockets and feathers effect. Our approach differs from the existing literature in two ways: (1) the data used: we use forward prices rather than spot prices because fuel leaders use forward contracts to buy crude oil. (2) The methodological approach is different. We adopt a more sophisticated econometric model, the Markov-switching model, and use it to contrast the robustness of the results obtained with the TAR-ECM methodology with an endogenous threshold (nonzero threshold). In general, the results show evidence of an asymmetric response of gasoline and diesel prices to changes in the price of crude oil, both in the short-run and with respect to the adjustment towards long-run equilibrium. These price asymmetries fall in line with the “rockets and feathers” hypothesis.Ministerio de Economía y Competitividad | Ref. ECO2015-67305-PBanco de España | Ref. PR71/15-20229Ministerio de Economía y Competitividad | Ref. ECO2015-68367-RXunta de Galicia | Ref. GRC2014/02

Convergencia entre Andalucía y España: una aproximación a sus causas (1965-1995). ¿Afecta la inversión pública al crecimiento?

This paper explores issues regarding the regional convergence process. We study the per capita income of Andalusia compared with the remaining regions in Spain over period 1965-1995. Using a very simple growth model with public capital as a production factor, we show that infrastructure endowment is not the main cause of Andalusian relative lower income per capita, so we guess there is a small effect of public investment on growth. However, productive public spending could have played an important role in minimizing the inefficiencies yielded by a non-competitive labour market.Economic growth, infrastructures, unemployment.

Dynamic Laffer Curve in an Endogenous Growth Model with Pollution

This paper discusses the effects of a green tax reform in an AsK growth model without abatement activities and with a negative environmental externality in utility function. There is also a non-optimal level of public spending. The results depend on the financing source of public spending. When there is not public debt, a revenue-neutral green tax reform has not any effect on pollution, growth and welfare. On the contrary, when short-run deficits are financed by debt issuing, a variety of green tax reforms increase welfare. Nevertheless, in this framework, non-green tax reforms are also welfare improving.En este artículo se estudian los efectos de una reforma impositiva caracterizada por un incremento en el impuesto medioambiental, en un modelo de crecimiento endógeno AK en el que ningún agente dedica recursos a reducir la contaminación y en el que ésta aparece como una externalidad negativa en la función de utilidad del consumidor representativo. Hay un nivel no óptimo de gasto público. Los resultados dependen de la fuente de financiación de dicho gasto. Si el gobierno no puede endeudarse, una reforma impositiva “verde” que mantiene constante el nivel de ingresos no tiene ningún efecto sobre contaminación, crecimiento y bienestar. Sin embargo, cuando se permite que el gobierno incurra en déficits a corto plazo, existe un amplio conjunto de reformas impositivas “verdes” que generan aumentos del bienestar. No obstante, en este nuevo escenario una reducción del impuesto medioambiental también permite obtener mejoras del bienestar.