A Modern Guide to State Intervention
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A Modern Guide to State Intervention

Economic Policies for Growth and Sustainability

Edited by Nikolaos Karagiannis and John E. King

A Modern Guide to State Intervention investigates the impact of the changing role of the state, offering an alternative political economy for the third decade of the twenty-first century. Building on important factors including history, the role of institutions, society and economic structures, this Modern Guide considers economic and administrative interventions towards changing the destabilized status quo of modern societies.
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Chapter 5: Fiscal policy and government debt in alternative models of growth and distribution

Amitava Krishna Dutt

Abstract

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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