A note on Growth, Welfare and public policy

Vol. 21 No. 1 (2001)

Jan-Mar / 2001
Published January 1, 2001
PDF-English
PDF-English

How to Cite

Ferreira, Pedro Cavalcanti. 2001. “A Note on Growth, Welfare and Public Policy”. Brazilian Journal of Political Economy 21 (1):106-22. https://doi.org/10.1590/0101-31572001-1231.

A note on Growth, Welfare and public policy

Pedro Cavalcanti Ferreira
Escola de Pós-Graduação em Economia, Fundação Getúlio Vargas, Rio de Janeiro/RJ, Brasil.
Brazilian Journal of Political Economy, Vol. 21 No. 1 (2001), Jan-Mar / 2001, Pages 106-122

Abstract

ln this note the growth and welfare effects of fiscal and monetary policies are investigated in four economies where public investment is part of the productive process. It is shown that growth is maximized at positive levels of income tax and inflation but that there is no direct relationship between government size, productivity and growth or between inflation and growth. However, unless there are no transfers, no political conflict or public goods in the economy, maximization of growth does not imply welfare maximization and the optimal tax rate and government size are greater than those that maximize growth. Money is not superneutral and the optimal rate of money creation is below the maximizing rate of growth.

JEL Classification: O41; H30.


Keywords: Public expenditure investment economic growth