We develop in this paper an augmented version of the Solow (1956) growth model, including the role of government. The model leads to a non-monotonic relationship between the rate of growth of per capita output and government size, generalizing previous results by Barro (1990) to the case in which returns to scale to private factors are not constant.
(1999) Bajo Rubio, Óscar; Díaz Roldán, Carmen; Montávez Garcés, María Dolores; Economía; Ekonomia
This paper presents an assessment of the effects of fiscal policy on economic growth. Starting from a theoretical model in which only those fiscal policy instruments presumed to strictly influence the production process (i. e., public capital and transfers) are incorporated into the production function, we provide an empirical application for the case of the Spanish regions during the period 1967-1991. The results confirm the positive effect of public investment on growth, together with a positive effect of transfers but only for poorer regions.
