We introduce public spending, financed through income taxation, in the Ramsey model with heterogeneous agents. Public spending as a source of welfare generates more complex dynamics. In contrast to previous contributions focusing on similar models but with wasteful public spending, limit cycles through Hopf bifurcation and expectation-driven fluctuations appear if the degree of capital-labor su...

The Keynesian multiplier effect is reinterpreted and several issues that may have misled assessments of the effect of fiscal spending are discussed. It is shown that even in the textbook Keynesian framework some transfer policy ‘reduces’ aggregate demand and that public works spending may completely crowd out private consumption. Useless public works are found to be equivalent to transfers alth...

Recent international agreements on tax data sharing aim to facilitate residence based taxation of capital and thus mitigate tax competition. I show that residence based capital tax rates can still decline with the number of financially integrated countries when public spending and debt are used strategically. While suboptimal in the steady state, strategic policies persist during transition if ...

Social welfare programs support the income, education, nutrition, and medical care needs of many of this country's elders and children. Over the past twenty years, however, three times as many children as elders have lived in poverty, and poverty rates for children have consistently exceeded those for the elderly. Given the continued disparity in poverty rates, it is important to track levels o...

We introduce public capital and public services as inputs in an endogenous growth model. We show that the growth rate depends on the apportionment of tax revenues between the accumulation of public capital and the provision of public services. When public spending is financed by proportional income taxes, the growth rate, the level of public spending as a proportion of GDP, the level of investm...