Resource title

The politics of endogenous growth

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Resource description

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.

Resource author

Paul J. Zak, Chetan Ghate

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/18056

Resource license

Adapt according to the presented license agreement and reference the original author.