A note on policy, the composition of public expenditures and economic growth

In this article we study the growth and welfare effects of fiscal and monetary policies in economies where public investment is part of the productive process we present four different models that share the same technology with public infrastructure as a separate argument of the production function. We show that growth is maximized at positive levels of income tax and inflation. However, unless there are no transfers or public goods in the economy, maximization of growth does not imply welfare maximization we show that the optimal tax rate is greater than the rate that maximizes growth and the optimal rate of money creation is below the growth maximizing rate. With public infrastructure in the production function we no longer obtain superneutrality in the Sidrausky model.

The impact of public capital and public investment on economic growth: an empirical investigation

in this anicle we measure the impact of public sector capital and investment on economic growth. Initially, traditional growth accounting regressions are run for a cross-country data set. A simple endogenous growth model is then constructed in order to take into account the determinants of labor, private capital and public capital. In both cases, public capital is a separate argument of the production function. An additional data-set constructed with quarterly American data was used in the estimations of the growth mode!. The results indicate lhat public capital and public investment play a significant role in determining growth rates and have a significant impact on capital and labor returns. Furthermore, the impact of public investment on productivity growth was found to be positive and always significant for bolh samples. Hence. in a fully optimizing modelo we confmn previous results in the literature that lhe failure of public investment to keep pace with output growlh during the Seventies and Eighties may have played a major role in the slowdown of lhe productivity growth in the period. Anolher main outcome concems the output elasticity wilh respect to public capital. The coefficiem estimates are always positive and significant but magnitudes depend on each of lhe two data set used.

Growth, increasing returns, and public infrastructure : time series evidence

Initial endogenous growth models emphasized the importance of external effects and increasing retums in explaining growth. Empirically, this hypothesis can be confumed if the coefficient of physical capital per hour is unity in the aggregate production function. Previous estimates using time series data rejected this hypothesis, although cross-country estimates did nol The problem lies with the techniques employed, which are unable to capture low-frequency movements of high-frequency data. Using cointegration, new time series evidence confum the theory and conform to cross-country evidence. The implied Solow residual, which takes into account externaI effects to aggregate capital, has its behavior analyzed. The hypothesis that it is explained by government expenditures on infrasttucture is confIrmed. This suggests a supply-side role for government affecting productivity.

Public expenditures taxation and welfare measurement

this article addresses the welfare and macroeconomics effects of fiscal policy in a frarnework where govemment chooses tax rates and the distribution of revenues between consumption and investment. We construct and simulate a model where public consumption affects individuaIs' utility and public capital is an argument of the production function. The simulations suggest that by simply reallocating expenditures from consumption to investment, the govemment can increase the equilibrium leveIs of capital stock, hours worked, output and labor productivity. Funhennore, we 'show that the magnitude and direction of the long run impact of fiscal policy depends on the size of the elasticity of output to public capital. If this parameter is high enough, it may be the case that capital stock, within limits, increases with tax rates.

Budgeting and resource allocation in universities, a public choice approach

The calls urging colleges and universities to improve their productivity are coming thick and fast in Brazil. Many studies are suggesting evaluation systems and external criteria to control universities production in qualitative terms. Since universities and colleges are not profit-oriented organizations (considering just the fair and serious researching and teaching organizations, of course) the traditional microeconomics and administrative variables used to measure efficiency do not have any direct function. In this sense, It could be created a as if market control system to evaluate universities and colleges production. The budget and the allocation resources mechanism inside it can be used as an incentive instrument to improve quality and productivity. It will be the main issue of this paper.

Three essays on education from the perspective of the economics of public setor

This work consists of three essays organized into chapters that seek to answer questions at first sight unrelated, but with one common denominator, which is the scarcity of public resources devoted to education, overall, especially in lower education. . The first chapter deals with the scarcity of resources devoted to education in a context of population aging. Two hypotheses were tested for Brazilian municipalities on the relationship between the aging of the population and educational expenditure. The first, already proven in the literature, is that there is an intergenerational conflict for resources and the increase of the share of elderly in the population reduces the educational expenditure. The second, proposed here for the first time, is that there should be reduction of competition for resources if there is a relationship of co-residence between young and old. The results indicated that an increase in the share of elderly reduces the educational expenditure per youth. But the results also illustrate that an increase in the share of elderly co-residing with youth (family arrangement more common in Latin American countries) raises the educational expenditure, which reflects a reduction of competition for resources between generations. The second chapter assesses the allocative efficiency of investments in Higher Education. Using the difference between first-year and last-year students’ scores from Enade aggregated by HEI as a product in the Stochastic Production Function, is possible to contribute with a new element in the literature aimed at estimating the production function of education. The results show that characteristics of institutions are the variables that best explain the performance of students, and that public institutions are more inefficient than the private ones. Finally, the third chapter presents evidence that the allocation of public resources in early childhood education is important for a better future school performance. In this chapter was calculated the effects of early childhood education on literacy scores of children attending the 2nd grade of elementary school. The results using OLS and propensity score matching show that students who started school at the ages to 5, 4, and 3 years had literacy scores between 12.22 and 19.54 points higher than the scores of those who began school at the ages 6 years or late. The results also suggest that the returns in terms of literacy scores diminish in relation to the number of years of early childhood education.

Rational expectations and the service of public debt: a recursive approach

This paper uses dynamic programming to study the time consistency of optimal macroeconomic policy in economies with recurring public deficits. To this end, a general equilibrium recursive model introduced in Chang (1998) is extended to include govemment bonds and production. The original mode! presents a Sidrauski economy with money and transfers only, implying that the need for govemment fmancing through the inflation tax is minimal. The extended model introduces govemment expenditures and a deficit-financing scheme, analyzing the SargentWallace (1981) problem: recurring deficits may lead the govemment to default on part of its public debt through inflation. The methodology allows for the computation of the set of alI sustainable stabilization plans even when the govemment cannot pre-commit to an optimal inflation path. This is done through value function iterations, which can be done on a computeI. The parameters of the extended model are calibrated with Brazilian data, using as case study three Brazilian stabilization attempts: the Cruzado (1986), Collor (1990) and the Real (1994) plans. The calibration of the parameters of the extended model is straightforward, but its numerical solution proves unfeasible due to a dimensionality problem in the algorithm arising from limitations of available computer technology. However, a numerical solution using the original algorithm and some calibrated parameters is obtained. Results indicate that in the absence of govemment bonds or production only the Real Plan is sustainable in the long run. The numerical solution of the extended algorithm is left for future research.