Economic growth with finite lifetimes

Fiscal Policy and Economic Growth

“…And if the revenue, so raised, is spent in a less productive way than is would be by the private sector, the overall growth effect would be negative. Works by Araujo and Martins (1999) confirm this view. In their analysis they find that public debt hampers growth because it competes with private physical capital for individual savings.…”

Government Revenues and Expenditures in Guinea-Bissau: Causality and Cointegration

“…On the other hand, if the economy is non-Ricardian, due to credit constraints or overlapping generations, then public deficits can change the private incentives to accumulation and thus directly influence the rate of growth of the economy. As argued by Araújo and Martins (1999), running a debt-financed deficit can induce the government to absorb additional resources from the private sector, which could have been used instead for the accumulation of private physical capital. If the revenue raised in that fashion is spent in a less productive way than it would be by the private sector, the overall growth effect would be negative.…”

Brazil: An Empirical Study on Fiscal Policy Transmission

“…This relation is analysed below. Araujo and Martins (1999) show that long-term sustainable growth is possible in a sector overlappinggenerations model. They assume a convex technology, no redistribution of income from the previous generation to later ones, with income taxation and without the pure altruism sustained by Barro (1974).…”

“…Araujo and Martins (1999) show that long-term sustainable growth is possible in a sector overlappinggenerations model. They assume a convex technology, no redistribution of income from the previous generation to later ones, with income taxation and without the pure altruism sustained by Barro (1974). Working with a production function of the type Y=AK, and assuming that the agent's utility function incorporates an absolute inheritance motive, the authors deduce a clear policy repercussion from the model: an increase in government debt has a negative effect on the rate of growth of the capital stock, such that co-integration equation at the 5% significance level, according to the data shown in annex tables A.2 and A.3.…”