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Published in:
1996 | OriginalPaper | Chapter
Public Spending
Author : Toshihiro Ihori
Published in: Public Finance in an Overlapping Generations Economy
Publisher: Palgrave Macmillan UK
Included in: Professional Book Archive
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In this chapter, we investigate positive and normative effects of public spending. Most of the previous literature on government expenditure has investigated the effect of public spending financed by lump-sum taxes (or wage income taxes with exogenous labor supply). The conventional view is that an increase in public spending, which will not contribute to stimulating production has a negative impact on capital formation due to the resource withdrawal effect.