PL EN


2007 | 55 | 5 | 476-483
Article title

EXPENDITURE COMPETITION AND A SOFT BUDGET CONSTRAINT

Authors
Title variants
Languages of publication
EN
Abstracts
EN
This paper offers a two-period small open economy model with publicly provided production inputs. The model confirms that if government's and consumers' relative preferences for second period utility coincide, while at the same time the public cost of borrowing and the consumers' return on saving are identical, lump-sum taxation and public debt are equivalent methods of financing public input provision. However, if the public cost of borrowing and the consumers' return on saving do not match, debt financing similarly as capital taxation can depending on circumstances lead to under- or over-provision of public inputs in a small open economy. Furthermore, if the government cannot ex ante commit to a certain expenditure level, the difference between the government's and consumers' discount rate can also result into under- or over-provision of public inputs.
Contributors
  • A. Jevcak, Ekonomicky ustav SAV, Sancova 56, 811 05 Bratislava 1, Slovak Republic
References
Document Type
Publication order reference
Identifiers
CEJSH db identifier
07SKAAAA03006167
YADDA identifier
bwmeta1.element.1c6b153f-c77d-3627-a019-049b169f33a7
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