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Federal Reserve Bank of San Francisco
Working Papers in Applied Economic Theory
Fiscal policy and productivity growth in the OECD
Steven P. Cassou
Kevin J. Lansing
Abstract

We use a simple endogenous growth model with productive public capital to investigate the degree to which observed fiscal policies in eight OECD countries can account for slowdowns in the growth rates of aggregate labor productivity since 1970. In model simulations, we find that none of the observed public capital policies can generate slowdowns of sufficient magnitude to match those in the data. For most countries in our sample, a simulation that combines the observed public capital policy with the observed tax policy does a better job of accounting for the slowdown than either policy in isolation.


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Steven P. Cassou & Kevin J. Lansing, Fiscal policy and productivity growth in the OECD, Federal Reserve Bank of San Francisco, Working Papers in Applied Economic Theory 99-02, 1999.
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Keywords: Fiscal policy ; Infrastructure (Economics)
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