Politics and Efficiency of Separating Capital and Ordinary Government Budgets
We analyze a "golden rule" that separates capital and ordinary account budgets and allows a government to finance only capital items with debt. Many national governments followed this rule in the eighteenth and nineteenth centuries, and most U. S. states do today. We study an overlapping-g...
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| Veröffentlicht in: | The Quarterly journal of economics 2006-11, Vol.121 (4), p.1167-1210 |
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| container_end_page | 1210 |
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| container_issue | 4 |
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| container_title | The Quarterly journal of economics |
| container_volume | 121 |
| creator | Bassetto, Marco Sargent, Thomas J. |
| description | We analyze a "golden rule" that separates capital and ordinary account budgets and allows a government to finance only capital items with debt. Many national governments followed this rule in the eighteenth and nineteenth centuries, and most U. S. states do today. We study an overlapping-generations economy where majorities choose durable and nondurable public goods in each period. When demographics imply even moderate departures from Ricardian equivalence, the golden rule substantially improves efficiency. Examples calibrated to U. S. demographics show greater improvements at the state level or with nineteenth century demographics than under current national demographics. |
| doi_str_mv | 10.1093/qje/121.4.1167 |
| format | Article |
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| source | Jstor Complete Legacy; Oxford University Press Journals All Titles (1996-Current); Business Source Complete |
| subjects | Balanced budgets Cost efficiency Debt Debt financing Demographics Economic efficiency Economic history Economic policy Economic theory Efficiency Financial investments National debt Public capital Public goods Public investments Studies Taxes |
| title | Politics and Efficiency of Separating Capital and Ordinary Government Budgets |
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