Finanzwissenschaftliche Diskussionsbeiträge / Finanzwissenschaftliches Forschungsinstitut an der Universität zu Köln 08-7
In this paper, we compare growth and welfare e¤ects of various budget rules within an endogenous growth model with productive public capital, utility enhancing public consumption and public debt. We find that a fixed deficit regime does not affect the long run growth rate compared to a balanced budget while the growth rate is increased by a golden rule. Welfare effects are ambiguous. Simulations indicate that economies populated by households who have a strong tendency to smooth consumption should adhere to a balanced budget rather than a golden rule or a fixed deficit rule from a welfare point of view.
Budget rules golden rule of public finance fiscal policy endogenous growth welfare