TY  - JOUR
AU  - Engen,Eric M.
AU  - Skinner,Jonathan
TI  - Fiscal Policy and Economic Growth
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4223
PY  - 1992
Y2  - December 1992
UR  - http://www.nber.org/papers/w4223
L1  - http://www.nber.org/papers/w4223.pdf
N1  - Author contact info:
Eric M. Engen
American Enterprise Institute
1150 Seventeenth Street, NW
Washington, DC 20036
Tel: 202/862-5837
Fax: 202/862-7177
E-Mail: eric.m.engen@frb.gov

Jonathan S. Skinner
Department of Economics
6106 Rockefeller Hall
Dartmouth College
Hanover, NH 03755
Tel: 603/646-2535
Fax: 603/646-2122
E-Mail: jonathan.skinner@dartmouth.edu
AB  - One view of government fiscal policy is that it stifles dynamic economic growth through the distortionary effects of taxation and inefficient government spending. Another view is that government plays a central role in economic development by providing public goods and infrastructure. This paper develops a generalized model of fiscal policy and output growth that allows for (i) a positive or negative effect of government spending on private productivity, (ii) increasing or decreasing returns to scale, (iii) a transition path away from the equilibrium growth path, and (iv) intratemporal tax distortions. Using data from 107countries during the period 1970-85,and correcting for the potentially serious problem of endogeneity in government policy, we find that a balanced-budget increase in government spending and taxation is predicted to reduce output growth rates.
ER  -