EXPENDITURE COMPETITION AND A SOFT BUDGET CONSTRAINT

• Authors: Jevcak A.
• 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.

Keywords

EN

CAPITAL MOBILITY; PUBLIC DEBT; PUBLIC INPUT PROVISION

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2007
• Volume: 55
• Issue: 5
• Pages: 476-483
• Document type: ARTICLE

Contributors

author

Jevcak A.

• A. Jevcak, Ekonomicky ustav SAV, Sancova 56, 811 05 Bratislava 1, Slovak Republic

Identifiers

CEJSH db identifier

07SKAAAA03006167