Sp. Cassou et Kj. Lansing, OPTIMAL FISCAL-POLICY, PUBLIC CAPITAL, AND THE PRODUCTIVITY SLOWDOWN, Journal of economic dynamics & control, 22(6), 1998, pp. 911-935
This paper develops a quantitative theoretical model for the optimal p
rovision of public capital. We show that the ratio of public to privat
e capital in the US economy since 1925 evolves in a manner that is bro
adly consistent with an optimal transition path derived from a simple
growth model. The model is used to quantify the conditions under which
an increase in the stock of public capital is desirable and to invest
igate the degree to which nonoptimal fiscal policies can account for t
he US productivity slowdown. (C) 1998 Elsevier Science B.V. All rights
reserved.