Economic Policies for Growth and Sustainability
Edited by Nikolaos Karagiannis and John E. King
Chapter 5: Fiscal policy and government debt in alternative models of growth and distribution
Dutt introduces fiscal policy into simple models of growth and income distribution between workers and capitalists, including models with full employment growth, classical-Marxian models, and models in which aggregate demand influences economic growth. The models are first analysed for the case of a balanced fiscal budget in which all government spending is on government consumption, and are then extended to examine government deficits and the dynamics of government debt, and public investment which affects productivity growth. According to Dutt, the models imply that fiscal policy expansion is not necessarily associated with adverse effects of growth and income distribution, and that the effects depend on the structural conditions prevailing in the economy.
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