Optimal fiscal policy in a multisector model: The price consequences of government spending.
Industrial dynamics and the neolclassical growth model.
Allocating Government Education Expenditures across K-12 and College Education.
Labor Market Trends with
Balanced Growth.
Tax Reform with Useful
Public Expenditures.
Growth Effects of Shifting from a Graduated- Rate Tax System to a Flat Tax.
Fiscal Policy and Productivity Growth in the OECD.
Uniform Two-Part Tariffs and Below Marginal Cost Prices: Disneyland Revisited.
Optimal Fiscal Policy, Public Capital, and the Productivity Slowdown.
On Public Capital Analysis with State Data.
The Link Between Tax Rates and Foreign Direct Investment.
Welfare, Stabilization or Growth: A Comparison of Different Fiscal Objectives.
Equivalence of the Standard and Modified Switching Regression Models.
A Normative Analysis of Public Capital.
Optimal Tax Rules in a Dynamic Stochastic Economy with Capital.
A Diagnostic Test Without Numerical Integration.
Backward Solving Quarterly Models with Seasonal or Annual Shocks.
Health Plan Choice and the Utilization of Health Care Services.
The Demand for Employment-Based Health Insurance Plans.
Employment Based Health Insurance.
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Abstract: This paper investigates a variety of objectives that are commonly used to motivate government fiscal action. These include, welfare maximization, stabilization and growth maximization. The policies are compared on the basis of their implications for welfare, volatility and growth. We show that stabilization policies can produce welfare levels that are nearly identical to those of welfare maximization policies and that both welfare maximization and stabilization policies yield large welfare gains and modest growth losses relative to growth maximization policies. We also show that there are side issues to stabilization polices. In particular: (1) It is not possible to stabilize all macroeconomic variables simultaneously, even when the number of policy instruments is equal to the number of shocks; (2) stabilizing a particular variable requires increased volatility of some other variable; (3) stabilization requires some flexibility regarding the government's budget constraint; and, (4) stabilization requires the government to respond in a precise and immediate way to exogenous shocks which hit the economy.
